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UK cuts VAT on household electricity bills starting October

The VAT rate will drop from 5% on October 1, with typical households estimated to save about £45 a year, funded by cancelling the digital ID program.

Reported · Written up by our desk · Europe

The UK government has announced a cut to VAT on household electricity bills to begin on October 1, reducing the rate from 5% and saving a typical household about £45 a year, according to BBC Business.

Ministers said the measure will be financed by savings from cancelling the digital ID programme, which had been projected to cost £1.8 billion over the next three years, with the government estimating the policy will cost £850 million in the current financial year.

Suppliers have been told to pass the VAT reduction through to all household customers, including those on fixed tariffs, and the cut will apply in England, Scotland and Wales, while Northern Ireland would receive equivalent funding due to its different regulatory framework.

BBC Business reports the move is designed to help households with the cost of living, after household electricity prices rose 13% for many customers at the start of July under Ofgem's price cap, with analysts warning winter pressure could persist amid global supply constraints tied to the US-Israeli war with Iran.

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