# UK to Eliminate VAT on Household Electricity Bills Starting October

*Britain's new Prime Minister Andy Burnham announced the removal of VAT on domestic electricity bills, effective October.*

July 21, 2026 · Economy

Britain's new Prime Minister Andy Burnham announced the removal of value added tax (VAT) on UK domestic electricity bills, effective October 1. This measure aims to ease the cost of living for millions of Britons and is expected to save the average household about £45 ($61) annually. The policy coincides with an anticipated rise in the UK energy regulator's price cap on electricity and gas prices.

## Immediate Relief for Households

In a statement, Prime Minister Burnham emphasized the government's commitment to addressing rising energy costs. 'We're taking immediate action to cut taxes on energy bills, put more money in people's pockets and bring back hope,' he said. The Labour government believes this tax cut will provide significant relief as the Ofgem price cap is expected to increase.

## Funding and Context

The funding for this policy comes from the cancellation of the previous government's plan for a digital ID scheme, which was estimated to cost taxpayers £1.8 billion. This move underscores the new administration's focus on direct financial relief for households amidst economic challenges. The VAT removal is the first in a series of measures aimed at tackling the cost of living crisis.

## Sources

- BSS

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Source: https://pulsetoday.com.bd/en/economy/uk-cuts-vat-on-household-electricity-bills