Healey extends electricity VAT cut and scraps gas standing charges

Chancellor John Healey today extended the cut to VAT on household electricity bills through winter and spring to July, which he said would take £50 off the annual price cap.

The cut, which took effect on 1 October for 29 million households, had been funded only for this financial year when it was announced in July.

From 2027, standing charges will be removed from household gas bills through Ofgem, Healey told MPs. He said the charges cost people over £100 a year regardless of how much gas they use. Similar reforms to electricity standing charges will be set out later.

This winter, 20 million households in council tax bands A to D will receive a £100 household energy payment, paid directly into bank accounts. Healey said the £2.6bn scheme would “take the pressure off in the coldest months”. The Scottish, Welsh and Northern Ireland governments will receive their share of the funding.

“I know that with the conflict in the Middle East, rising energy bills are a real worry,” Healey said, adding that gas prices had nearly tripled since February.

Healey also said he was ending the practice of loading policy costs onto household bills through levies, and would scrap the upcoming Gas Shippers Obligation, a levy to fund hydrogen projects.

The speech did not include new measures for home solar panels, heat pumps or batteries.

Existing support comes through the government’s Warm Homes Plan, which offers up to £15bn in grants and low or zero-interest loans for solar panels, heat pumps and home batteries over five years. Plug-in balcony solar kits went on sale at Argos in August, priced from about £400.

Lucy Mangan, partner and head of tax services at Menzies, said: “Households will see some relief on their gas bills, but firms facing the same energy costs have been left out in the cold.”