Sean Daily

This article is based on public information as of 4 October 2026. Please check the official sources below for the latest details.

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What changed on 1 October

Two changes to household energy bills took effect on the same day. Ofgem, the energy regulator, raised the price cap that limits what suppliers can charge on default (standard variable) tariffs. At the same time, the government removed VAT from domestic electricity in Great Britain for six months.

On 26 August, Ofgem announced a 4% rise in the cap for 1 October to 31 December 2026. For a typical household using both gas and electricity and paying by Direct Debit, the annual figure moves from £1,663 to £1,723, which is £60 a year or £5 a month if that level were sustained for a full year. Ofgem says the cap protects around 22 million households on default tariffs, and that roughly 35% of households, about 11 million, are on fixed tariffs and are not affected by the rise.

The cap is not a limit on your total bill. It limits the unit rate and daily standing charge, so what you pay still depends on how much energy you use, where you live and how you pay.

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The numbers: unit rates and standing charges

Ofgem publishes the average rates for customers paying by Direct Debit across England, Scotland and Wales. The table below compares the current quarter with the previous one. Ofgem warns that the two periods cannot be compared directly, because the October figures exclude VAT on electricity while the July figures included it.

Direct Debit average	1 July to 30 September 2026	1 October to 31 December 2026
Electricity unit rate	26.11p per kWh	26.32p per kWh
Electricity standing charge	57.19p per day	54.83p per day
Gas unit rate	7.33p per kWh	7.97p per kWh
Gas standing charge	29.04p per day	29.68p per day
Typical annual bill (dual fuel)	£1,663	£1,723

Regional rates differ from these averages, and standard credit and prepayment meter customers have their own rate tables. Ofgem has a postcode lookup on its website if you want the exact figures for your area.

One technical change is worth knowing about. In July, Ofgem updated the “typical domestic consumption values”, the measure of how much energy a typical home uses. It reduced them to reflect households using about 7% less electricity and 17% less gas than in the last review. Ofgem says that on the old 2023 basis the same cap would have been £1,935 from October, up from £1,862, so headline figures are lower under the new measure.

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Why gas is driving the rise

Ofgem attributes the increase mainly to higher wholesale gas prices, linked to the ongoing conflict in the Middle East, and says volatile global gas markets remain the dominant driver. It says wholesale prices rose by 11% over the past three months.

That is why the effect is uneven. Because of the VAT cut, Ofgem says electricity bills stay broadly stable, while gas bills rise by about 8%. A household that does not use gas would see an increase of less than 1%. Without the VAT change, Ofgem says the typical figure would have been around £45 higher.

Some context from the regulator: it says the new cap is still 52% below the peak of the 2022 energy crisis, when the government limited typical bills at £2,500, but that adjusted for inflation it is 7% higher than the same period in 2025.

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The electricity VAT cut in detail

HMRC’s Revenue and Customs Brief 10 (2026) says the government announced the temporary zero rate on 21 July 2026. It applies to qualifying supplies of electricity in Great Britain from 1 October 2026 to 31 March 2027. Qualifying supplies are the same as before: electricity for domestic use, or for a charity’s non-business use. Other fuels are not affected, and in Northern Ireland the 5% reduced rate remains.

For bills that straddle 1 October, HMRC says suppliers may work out the VAT based on the date the energy was used, and recommends using meter readings to do so. In practice, that means your first bill covering the changeover may show a mix of rates, so it is worth keeping an eye on it.

Here is a simple, hypothetical illustration. If an electricity bill came to £100 before VAT, it would previously have been £105 with 5% VAT. At 0%, it stays at £100, which is a saving of about 4.8% of the bill. The more electricity you use compared with gas, the more you gain, which is why Ofgem notes that electricity-only households get a bigger reduction.

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Who is affected and how

Your situation	What Ofgem and HMRC say
Default (standard variable) tariff	The cap applies. Both the new rates and the electricity VAT cut are built into the figures.
Fixed tariff	Not affected by the cap rise. Ofgem says the VAT discount on electricity is applied automatically by suppliers.
Prepayment meter	Ofgem says prepayment customers pay the lowest cap rates, about £45 less than Direct Debit on average.
Northern Ireland	The 5% reduced rate of VAT on electricity remains, according to HMRC. The Ofgem cap covers England, Scotland and Wales.
Some small businesses	Ofgem says some small businesses covered by the cap also benefit from the electricity VAT cut.

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What could come next

Ofgem will announce the cap for 1 January to 31 March 2027 on 25 November 2026. Forecasts point upwards. Reuters reported on 30 September that consultancy Cornwall Insight forecasts a cap of £1,999 for typical use, up £276 on October’s £1,723, which would be the highest since March 2023. Cornwall Insight itself noted that the forecast could change, because Ofgem sets the wholesale element using prices from a fixed observation window. Treat that as a forecast, not a decision.

There is also a proposal in the news. The British Eye reports that the government is considering extending the VAT cut to household gas bills, which it says could reduce average bills by a further £40, with any decision likely to come at the Budget expected at the end of October. This is a report of something under consideration, not an announced policy, so do not budget around it.

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What this means for you

• Check which tariff you are on. If it is a default tariff, the new cap rates apply from 1 October.
• Take a meter reading around the changeover and compare it with your first bill, so you can see how the electricity VAT cut has been applied.
• Compare fixed deals. Ofgem’s Neil Kenward said fixed tariffs were available at £100 or more below the October cap. Check the length, any exit fees and what happens at the end of the deal before you switch.
• If you have a smart meter, ask your supplier about tariffs with cheaper electricity at off-peak times, which Ofgem says many suppliers offer.
• If you are struggling to pay, contact your supplier early. Ofgem says suppliers must help if you ask, for example with a repayment plan or emergency credit.

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Frequently asked questions

Q. Will my bill go up by exactly £60?

No. The £60 is for a typical dual-fuel household paying by Direct Debit, and assumes that level is sustained for a year. Your bill depends on your usage, region, meter type and payment method. Gas-heavy households will feel more of the rise than those using mostly electricity.

Q. Do I need to do anything to get the electricity VAT cut?

Ofgem says the discount is applied automatically by suppliers, including for fixed-tariff customers. You do not need to apply. It is still sensible to check your first bill after 1 October.

Q. Does the VAT cut apply to gas?

No. HMRC says other fuel types are not affected, and Ofgem confirms 5% VAT is still included on gas. A possible extension to gas has been reported as under consideration, but nothing has been announced.

Q. How long does the VAT cut last?

HMRC says the temporary zero rate runs from 1 October 2026 to 31 March 2027. After that date, the position depends on any future government decision.

This article is general information, not financial, tax, or legal advice. Rules and dates can change, so check the official sources or consult a qualified professional.