No VAT cut for household energy bills in Autumn Budget

(Image credit: Getty Images)

This week, the chancellor chose not to cut VAT on household energy bills in the Autumn Budget. At present, 5% of the money we spend on energy bills goes directly to the taxman.

Prior to the Autumn Budget, the Labour Party and several campaign groups had called for the Chancellor to slash VAT on energy bills in order to help families who are struggling with surging energy prices. At the start of this month, around 15 million homes in the UK saw their energy bills rise by 12% as the price cap increased. This meant that those on standard tariffs, with typical household levels of energy use, saw an increase of £139 - from £1,138 to £1,277 a year.

However, although cutting VAT on energy bills would reduce the amount that households pay for their gas and electricity, a Whitehall source told the BBC that the move would be poorly targeted and lower income households can be better helped by other schemes.

What help is available for low income families?

If you’re struggling to pay for your energy bills, then several schemes are available to help you, including:

  • The Warm Home Discount Scheme: This is worth £140 a year and provides a one-off reduction in your energy bills. However, not all suppliers offer the scheme and it’s issued on a first come, first served basis. In 2022, ministers plan to raise the amount to £150 and extend its availability to around three million households in England, Wales and Scotland.
  • Cold Weather Payment: This is worth £25 for every seven days of sub-zero temperatures in your area between November and the end of March. Broadly speaking, it’s available to the same group of recipients as the Warm Home Discount Scheme, but it’s paid automatically and covers all of the UK.
  • Winter Fuel Payment: Worth between £100 and £300, the Winter Fuel Payment is non-means tested and is paid to households with at least one person of pension age and some younger people on legacy payments. Like the Cold Weather Payment, it’s paid automatically and covers all of the UK.

How to get help when you’re struggling with your energy bills

The charity National Energy Action, which campaigns to combat fuel poverty, has estimated that a further 1.2 to 1.5 million households could struggle to heat and power their homes by next April. In addition, it’s currently estimated that four million people are already behind on their bills.

Sadly, online energy comparison sites currently cannot save you money on your energy bills because even the best energy deals on the market cannot beat the price cap. As a result, if you’re looking to switch tariff, the best way of doing this is to speak to your energy provider directly and see what deal they can offer you. However, even the best energy suppliers in the UK are struggling to offer cheap deals due to rising wholesale prices. Thankfully, you’re offered some protection from rising bills by the price cap.

If you’re struggling to pay your energy bills, the best thing you can do is speak to your supplier and try to agree a payment plan. If you cannot afford this, your supplier may fit a prepayment meter. If you cannot come to any form of agreement with your supplier or you’re not happy with the options they’re offering you, then speak to Citizens Advice.

Tom Brook

Tom is a freelance copywriter and content marketer with over a decade of experience. Originally from an agency background, he is proud to have worked on campaigns for a number of energy providers, comparison sites and consumer brands.