Energy Bills in 2027: The VAT Cut Extension, the £100 Household Energy Payment and the End of Gas Standing Charges

The 2026 Budget extended the VAT cut on electricity to July 2027, announced a £100 payment for most households in England, and set out plans to scrap gas standing charges. Our article on budgeting around Ofgem’s quarterly price cap told you to plan for VAT returning to electricity on 1 April 2027. That date has now moved, so here’s how the Budget changes your energy budget for next year.

The VAT cut now runs to July 2027

Electricity has been VAT-free since 1 October 2026, in a measure that was due to end on 31 March 2027. The Budget extends it by three months, to July 2027. The Treasury expects this to take around £50 off the annual price cap from April 2027, though the exact saving depends on how much electricity you use. Gas stays at 5% VAT.

Northern Ireland isn’t covered by the Ofgem cap, so the government is funding the Northern Ireland Executive to provide comparable help, expected to apply from April 2027.

For budgeting, this pushes the cliff edge back rather than removing it. If you’d planned for bills to rise in April, move that date to July in your plan - and still assume VAT will come back unless it’s extended again.

The £100 Household Energy Payment

• £100 per household, from January 2027.
• For households in England in council tax bands A to D, around 20 million homes, or about 80% of households in England.
• Delivered by local councils through the council tax system. The Budget describes it as paid directly into bank accounts - your council will confirm how it reaches you.
• Scotland, Wales and Northern Ireland receive funding to provide similar support, so check what your devolved government announces.
• Councils in England also get an extra £100 million to help households hit hardest by energy bills, including some in bands E and above.

If you’re in bands A to D in England, you shouldn’t need to apply. It’s worth making sure your council has your current details, especially if you’ve moved recently.

The simplest way to use it is to treat it as a one-off boost for the most expensive winter months rather than spending it as general income. Putting it straight into an energy sinking fund means it’s there when the January and February bills arrive.

Gas standing charges are being abolished

Gas standing charges average about £108 a year - the 29.68p a day in our earlier article - and you pay them however little gas you use. The government has asked Ofgem to abolish them, aiming for the end of 2027 or as soon as possible after that.

The cost doesn’t disappear. Suppliers will recover it through higher gas unit rates instead, which means:

• low gas users, such as small flats or homes that mostly use electricity, should pay less
• homes that use a lot of gas could pay more overall
• the government says it will set out targeted help for households that lose out

Electricity standing charges will also be reformed, with details due next year.

Other changes that affect household energy costs

• No new policy costs will be added to bills until a new Cost Control Framework is in place at the 2027 spending review.
• A planned levy on gas bills to fund hydrogen projects, the Gas Shipper Obligation, has been scrapped.
• An energy debt strategy, including a one-off targeted debt relief scheme for eligible households, is expected to save a typical household almost £30 by 2030.
• Import tariffs on kerosene heating oil are suspended until December 2028, which should help homes that heat with oil.
• £100 million is going towards cutting the cost of local, lower-powered public EV chargers from spring 2027. The Treasury estimates this will save drivers who charge on the street around £150 a year.

Updating your energy budget for 2027

• Move your “VAT returns” date from 1 April to July 2027 in your plan.
• If you’re in England in bands A to D, expect £100 from January 2027, and decide in advance where it’s going.
• Keep the buffer we suggested in our earlier article. The price cap still changes every quarter, and the VAT cut still has an end date.
• If you’re a light gas user, the end of standing charges could mean a lower bill from late 2027. If you use a lot of gas, don’t count on savings until Ofgem publishes the details.
• If you’re behind on energy bills, contact your supplier now rather than waiting for the debt relief scheme. Details of who is eligible haven’t been published yet.

The bottom line

The Budget gives most households a little more breathing space this winter: three more months without VAT on electricity, and £100 for most homes in England from January. Gas standing charges are going, but the cost moves to unit rates, so it’s good news mainly for low gas users. For a full list of what else changed, see our Budget 2026 round-up.