What difference will removing VAT from electricity bills make to your finances?

One of Andy Burnham’s first acts as prime minister was announcing that VAT on household electricity bills is to be removed. But the response seems to be mixed.

Many saw the move as a statement of intent that the Burnham government would make tackling cost of living a priority.

And according to an Opinium, almost half of the public (49%) back it.

But the same poll has found that nearly three-quarters (72%) believe it will make little or no difference to their finances.

How much will the VAT removal save me?

From 1 October, the rate of VAT applied to household electricity will be cut from 5% to 0% for six months.

The government believes cutting VAT on electricity bills will take about £45 off the yearly Ofgem price cap in October. 

Young adults believe VAT cut will make a difference

Interestingly, young adults are more likely to believe the VAT cut will improve their finances than older people.

Nearly two-fifths (39%) of 18 to 34-year-olds said they believe the measure will help.

But less than a quarter (24%) of people aged 35 to 49 feel the same, along with just 6% of those aged 50 and over.

VAT cut ‘shows direction of travel’

In fairness, the government hasn’t pitched the VAT removal as a silver bullet that will solve every household’s financial problems.

Speaking just after it was announced, the prime minister said: “It won’t take all of the pressure off, but it just shows a direction of travel and that we’re serious about helping them out”.

And the government has already hinted that more support, including longer-term measures, are set to be announced at this year’s Budget.

That takes place on 28 October, and we’ll be here on the day to let you know what’s been announced and what it means for you.

I’m struggling with my energy bills - what can I do?

If you’re finding it hard to keep up with your bills, then get in touch with your energy supplier.

They might be able to offer payment plans, grants and advice on managing your account.

Check what benefits you’re entitled to

You may be eligible for some financial support to help with day-to-day living costs.

Get in touch or use our benefits calculator to see what you could claim.

It might be more than you realise.

Get debt advice

If you’re in arrears and struggling with other debts, contact us for confidential, practical and impartial debt advice.

Save energy

While energy prices are beyond our control, you can make changes to how much you use - and therefore pay for.

Just a few small changes like not leaving lights on in empty rooms or switching the TV off at the mains when you’re not watching it could save you money.

Check our list of 50 smart energy-saving tips for more easy ideas. 

Create a household budget

Make sure you know exactly how much money you’ve got coming in each month and where it’s going.

You can then prioritise your spending and work out where you can save money.

Check our guide to creating a budget to find out more.