Budget 2026: gas standing charges scrapped, 0% electricity VAT to July and £100 for most homes

Chancellor John Healey delivered the Budget on Wednesday 28 October 2026 with energy bills near the top of the list. The conflict in the Middle East has pushed up gas prices, and the January price cap is forecast to rise by about 27%. The Budget didn't intervene directly on that rise. It gave some immediate help and made one long-promised structural change: the gas standing charge is going.

Every energy measure at a glance

1. The gas standing charge is being abolished

The government has asked Ofgem to “abolish gas standing charges on domestic energy bills in Great Britain, aiming for delivery by the end of 2027 or as soon as possible after then.” The charge is about £108 a year now (29.68p a day under the October cap). It doesn't disappear: suppliers will recover the cost through the gas unit rate instead, which estimates put about 0.9p to 1.1p per kWh higher.

That makes it a redistribution. The Treasury says about 60% of households will save, by an average of £45 a year. Martin Lewis, who has campaigned against standing charges for years and called them “a poll tax on energy”, estimates 60% gain and 40% pay more, with break-even at roughly 12,500 kWh of gas a year. Uswitch puts it nearer 11,500 kWh. Flats, small homes and anyone who uses gas only for cooking gain the most; large gas-heated houses lose. The government has promised “targeted mitigation” for households who would be hit hardest.

Our full guide, gas standing charges scrapped: will you be better off?, has a winners-and-losers table, and the gas standing charge calculator works it out for your usage.

Electricity standing charges are not being scrapped. The government is “committing to reform electricity standing charges and will set out details next year.”

2. 0% VAT on electricity now runs to 1 July 2027

VAT on home electricity was cut from 5% to 0% on 1 October 2026 and was due to return on 1 April 2027. The Budget extends it by three months, “until July 2027”, in Great Britain. The Treasury says that takes about £50 off the annual price cap from April. Northern Ireland gets funding for comparable support, with VAT relief there expected from April 2027.

Gas stays at 5% VAT. The cut is applied by every supplier on every tariff, including fixes, so you don't need to do anything. Our electricity VAT cut guide has the details, and our April 2027 price cap forecast looks at what it means for April's bills.

3. £100 for households in council tax bands A–D

A £2.6 billion Household Energy Payment will put £100 into the bank accounts of households in council tax bands A to D in England, about 20 million homes, from January 2027. It's not means-tested. MoneySavingExpert reports that council tax Direct Debit payers will get it automatically; everyone else will need to give their council bank details. A further £100 million goes to English councils for targeted support, including for some homes in higher bands. Scotland, Wales and Northern Ireland get their share of funding to run similar schemes.

It's paid through the council tax system and has nothing to do with your energy supplier, so switching doesn't affect it. It also stacks with the £150 Warm Home Discount. More in our £100 Household Energy Payment guide.

The rest: levies, debt and heat pumps

• Gas Shipper Obligation scrapped. A planned new levy on gas bills to fund hydrogen projects won't go ahead. The government will fund them instead.
• No new policy costs on bills until a Cost Control Framework is set at the 2027 Spending Review. This builds on last year's Budget, which took about £150 of costs off bills from April 2026.
• Energy Debt Circuit Breaker. Household energy debt has passed £5 billion. A new strategy, including a one-off targeted debt relief scheme next year, is expected to save a typical household almost £30 by 2030.
• Heat pumps. The Boiler Upgrade Scheme stays at £400 million in 2027-28. The Warm Homes Plan loses £1 billion of capital grant, though most of the funding for low-income households and social housing is protected. See our heat pump guide.
• Fuel duty. The 5p cut and freeze are extended to 1 July 2027.

What the Budget didn't do

There was nothing to stop the January price cap rising. The latest supplier forecasts are E.ON Next £2,183 (26 October) and British Gas £2,185 (15 October), against October's £1,723, a rise of roughly £460 a year for a typical home. Ofgem confirms the figure on 25 November. The £100 payment covers about one quarter of that rise.

So the biggest decision for most households this winter is still whether to fix before January. Octopus repriced its fixes on 27 October: the 12M Fixed now averages about £1,948 a year for a typical home and the 18M about £1,888, both cheaper than the January forecast but dearer than today's cap. Our fix or variable guide runs the numbers, and you can see your own region's rates on Octopus prices by region.

Sources: HM Treasury: Budget 2026 · GOV.UK: Chancellor abolishes standing charges on gas bills · MSE: Gas standing charges to be scrapped · MSE: £100 payment for council tax bands A–D · E.ON Next price cap predictions · British Gas price cap forecast. Figures last checked 28 October 2026.