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UK to cut VAT on energy bills starting in October

The policy is estimated to reduce average annual household energy bills by about £45 and is forecast to lower CPI by around 0.1%.

Reported · Written up by our desk · Central Banks

Forexlive reports that the UK prime minister has announced the scrapping of VAT on energy bills starting October 1, aiming to reduce the cost of living and ease pressure ahead of winter.

The measure is expected to cost roughly £850 million and is set to be funded through the canceled digital ID scheme, which had previously been estimated at about £1.8 billion over coming years.

According to the report, the VAT cut is expected to apply to every household regardless of wealth, with early estimates pointing to an average reduction of about £45 in annual household energy bills ahead of the Ofgem price cap adjustment.

The announcement is also projected to take about 0.1% off consumer price inflation, and the article notes investors may watch how the gilts market reacts given the potential fiscal implications.

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