UK Government to Scrap Electricity VAT Starting October

01:46 AM EDT, 07/21/2026 (MT Newswires) -- The UK government under newly appointed Prime Minister Andy Burnham plans to remove the 5% value-added tax on household electricity bills beginning Oct. 1 to help ease cost-of-living pressures, according to a Tuesday release. The emergency relief measure is expected to lower the October price cap of the UK's Office of Gas and Electricity Markets, or Ofgem, by 45 pounds sterling annually, on top of the 150 pounds removed in the last budget. All domestic energy customers, including those on fixed tariffs, will receive the VAT reduction from suppliers, with eligible charities, care homes and non-VAT-registered small businesses set to benefit as well. The government said the measure will cost 850 million pounds for 2026 to 2027 and will be fully funded by the canceled 1.8 billion-pound digital ID program. Longer-term measures will be outlined in the upcoming budget.