United Kingdom removes VAT from household electricity bills to offset energy price cap rise

On October 1, 2026, the United Kingdom removed VAT from household electricity bills, saving average households around £45 a year. The tax cut, introduced by Prime Minister Andy Burnham, coincided with Ofgem raising the energy price cap by £60 to £1,723. Global energy costs, driven by the US-Iran conflict, may push the cap up 30% to £2,098 in early 2027. The government is considering extending the VAT removal to gas bills. Additionally, taxes on tobacco and vaping products increased, adding £2.20 per 10ml of vape liquid and 44p to a pack of cigarettes.