What will Andy Burnham’s VAT cut on electricity bills mean for you?
New prime minister is implementing immediate tax cut to help ease cost of living pressures for British householdsAndy Burnham to cut VAT on electricity bills as first cost of livin
By The Guardian
New Prime Minister Andy Burnham has announced an immediate cut to VAT on household electricity bills, reducing the rate from 5% to 0% starting 1 October 2026 for a six-month period until the end of the financial year in March. The policy is expected to save the average household in Great Britain approximately £45 per year based on current Ofgem price cap levels.
Burnham described the move as his first cost-of-living action to put more money in people’s pockets and bring back hope during his first full day in office. The £850 million cost to the Exchequer for 2026/27 will be funded by scrapping the previous government’s Digital ID programme, which was budgeted at £1.8bn over three years.
The cut applies only to electricity, not gas or central heating, and covers customers across England, Scotland and Wales, including those on fixed tariffs. Energy suppliers are expected to pass the saving directly to customers so it appears as a reduction on electricity bills from October.
Further decisions on funding beyond this financial year will be made at the next Budget, as the government has only confirmed funding for the current year.