VAT to be cut from household electricity bills in October

VAT will be removed from household electricity bills starting 1 October, the government announced, as part of Prime Minister Andy Burnham’s plan to ease cost‑of‑living pressures. The measure, which ends the 5 % VAT charge, is expected to save an average household roughly £45 a year. Funding for the cut will come from the savings generated by cancelling the digital ID programme, a project that was slated to cost £1.8 billion over the next three years. The Treasury estimates the VAT reduction will cost the exchequer about £850 million in the current fiscal year. Chancellor John Healey commented that the move would “provide immoderate reassurance this winter.” The announcement follows Burnham’s ascension to the premiership; he became the United Kingdom’s seventh prime minister since 2016, pledging to “bring backmost hope” to the nation. Former defence chief Healey was appointed chancellor as part of Burnham’s cabinet reshuffle on Monday, taking over from Rachel Reeves, who had served as chancellor under Sir Keir Starmer after Labour’s 2024 landslide victory. Burnham’s new cabinet is scheduled to convene for its first meeting at lunchtime on Tuesday.