Andy Burnham announces VAT cut on energy bills 'from this Thursday'

The move, worth £850 million, is expected to save the average household around £45 a year, giving families extra help as colder weather approaches, and the energy price cap increases.

At his first party conference speech since becoming Prime Minister, Mr Burnham said the Government wanted to provide immediate support for households facing ongoing cost-of-living pressures.

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What it means for households

From this Thursday, October 1 2026, VAT on domestic electricity bills will fall from 5% to 0%.

The Government says energy suppliers are expected to pass the saving directly on to customers, including those on fixed tariffs.

Officials estimate the measure will help millions of households from this week:

• Save the average household around £45 a year
• Cost around £850 million in 2026/27
• Help reduce inflation by around 0.10 percentage points

While the exact saving will depend on individual energy use, the announcement is expected to provide welcome relief for millions of families heading into winter.

Funded without increasing taxes

The Government explained the moves in July, saying the measure will be funded by cancelling the previous digital ID programme and reprioritising existing departmental budgets, allowing households to benefit without introducing new taxes.

Chancellor John Healey said this summer the announcement would provide reassurance for families while helping to tackle the cost of living: "For too long, too many people have struggled with the cost of living.

"Today's energy tax cut will give families some breathing room on bills and provide reassurance this winter."