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The new Prime Minister, Andy Burnham, has announced that VAT will be cut from electricity bills from October, in a move designed to ease cost-of-living pressures for millions of households.
Around 2.36 million households in England (9.4% of all households) were in fuel poverty in 2025, according to the Government’s Low Income Low Energy Efficiency (LILEE) measure. These are typically people on low incomes who are living in energy-inefficient homes, where the cost of heating and powering the property leaves them below the poverty line.
It’s not hard to see why so many people struggle to keep up with bills. The energy price cap rose by 13% in July, adding £221 a year to average costs, and bills are expected to increase further in October. The next change to the price cap will be announced at the end of August, but it is widely expected to go up again due to the conflict in the Middle East pushing up oil prices. You can read more about how the energy price cap works in our guide What is the energy price cap?
Here, we look at how much the VAT cut is likely to save you, and some of the steps you might be able to take to reduce your energy bills.
How much will the VAT cut on electricity bills save me?
The actual savings you’ll see from October’s change to VAT on electricity bills will depend on your individual circumstances.
Charlotte Kennedy, Chartered Financial Planner at Rathbones, one of the UK’s leading wealth and asset management groups, said: “The saving will vary from household to household, depending on factors including energy use, tariffs, property type, energy efficiency and household size.”
However, the average saving for a typical household is expected to be in the region of £45 a year.
Joe Lytwyn, personal finance expert at credit card provider thimbl.com, said: “Any reduction in the cost of essential household bills is likely to be welcomed by families, particularly after several years of higher living costs. While a saving of around £45 a year won’t transform household finances on its own, it could still ease some of the pressure, especially for those already carefully managing their monthly budget.
“Small savings across multiple areas can add up over time, so measures that reduce unavoidable household costs could play a useful role in improving financial resilience.”
How to cut energy bills
If you want to save more than £45 a year on your energy bills, there are several energy-saving measures you might be able to introduce that could help you cut costs.
1. Don’t overspend on showers
Keeping time spent in the shower to a minimum, as well as lowering the flow temperature of your boiler, is one way to help keep energy costs down.
Clair Hughes, savings expert at Vouchercodes.co.uk, said: “Especially during the warmer months when we tend to shower more, hot water usage can quietly eat into your budget. Hot water (for taps and showers) accounts for up to 25% of your annual energy bill – and most of us are overworking our boilers without realising it.
“Most combination boilers in the UK are set to a default flow temperature of around 75°C, but for everyday showers and taps, that’s usually hotter than necessary – especially in the summer. Turning the flow temperature down to around 60°C means your boiler works less hard, uses less energy, and costs you less, all without compromising comfort. You won’t feel much difference in warmth, but your bills could drop noticeably.”
2. Check appliances and standby usage
Making sure you turn appliances off properly at the mains rather than leaving them on standby is one of the simplest ways to cut energy bills, saving on average £45 a year, according to the Energy Saving Trust.
Madeleine Porter, Head of Marketing at Utility Bidder, said: “Households should also check if their fridge and freezer are kept at 5°C and freezers at -18°C, so they are not wasting energy by having them set colder than this. Most modern fridges and freezers have temperature gauges that you can adjust yourself, so check your settings.”
3. Change your laundry habits
Ms Hughes, from Vouchercodes.co.uk, said: “Laundry can be surprisingly costly, especially if you rely on hot washes and tumble drying. Most of us wash at higher temperatures or use the dryer out of habit, which pushes up energy use unnecessarily.
“Religiously switching to 30°C washes keeps clothes looking great, all while using far less energy than a hotter wash. Whenever possible, especially when the weather is warmer, skip the tumble dryer and let your clothes air dry inside or out in the sun. It’s free, gentle on fabrics, and easy on your bills.
“When the weather is nice, it’s tempting to get in as many loads of laundry as possible during the day. But, if you are on a smart tariff, scheduling your laundry to wash at night could save you hundreds across the year. Many energy providers offer up to 50% off rates during off-peak hours, so a little forward planning can make a big difference. Schedule your laundry to wash in the early hours of the morning, and hang it out to dry when you wake up.”
Learn more in our article Energy saving tips: how to reduce your bills.
4. See if you’re eligible for financial support
If you’re falling behind on your energy bills, it’s worth checking to see whether you might qualify for any financial support. Several energy providers offer hardship funds to those who meet certain eligibility criteria.
Ms Porter said: “Many households are likely missing out on energy support schemes because they haven’t checked what help is available. Several suppliers offer support, such as grants to help tackle your bill. Depending on eligibility, support can range from one-off payments of £150 to over £300 in financial support, helping to ease pressure on rising bills throughout the year.”
Find out more in our guide Is your energy supplier offering grants to pay off energy debts?
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