VAT To Be Removed From Household Electricity Bills From October 1 In Burnham’s First Major Policy Move

VAT to Be Removed from Household Electricity Bills from October 1 in Burnham’s First Major Policy Move UK Prime Minister Andy Burnham has announced that Value Added Tax VAT will be removed from household electricity bills from 1 October, marking the first major policy initiative of his premiership as his government seeks to ease the country’s cost-of-living pressures. The government said the measure will reduce the VAT rate on domestic electricity from 5% to 0%, providing immediate financial relief for millions of households ahead of the winter months. Officials estimate the policy will save the average household around £45 a year under current energy price cap forecasts. Downing Street said the tax cut will be funded by cancelling the previous government’s planned Digital ID programme, which ministers say frees up enough resources to finance the initiative without additional borrowing this year. Chancellor John Healey said the move would “give families some breathing space on bills” while helping to tackle the cost-of-living crisis. Announcing the policy, Burnham said his government was committed to “putting more money in people’s pockets and bringing back hope,” describing the VAT cut as an immediate step to support households struggling with rising living costs. The announcement comes as energy prices remain under pressure despite previous government measures to reduce household bills. Analysts note that while the VAT cut will lower electricity costs, the overall impact on household bills will still depend on future wholesale energy prices and Ofgem’s energy price cap. The proposal has drawn criticism from opposition politicians, who questioned whether cancelling the Digital ID programme would fully cover the cost of the tax cut. The government, however, maintains that the policy is fully funded for the current financial year.

The VAT reduction is scheduled to take effect on 1 October, with electricity suppliers expected to pass the savings directly to domestic customers through lower bills.