VAT to be cut from household energy bills in October

VAT will be cut from household electricity bills, the government has announced, as part of new prime minister Andy Burnham's plan to offer help with the cost of living.

The reduction from 5% VAT will come into effect on 1 October, saving a typical household about £45 a year.

Ministers said it would be funded by savings from the cancellation of the digital ID programme, which was going to cost £1.8bn over the next three years. The announcement is estimated to cost £850m this financial year, the government said.

John Healey, the new chancellor, said that the announcement would "provide some reassurance this winter."

The announcement comes the day after Burnham became the UK's seventh prime minister since 2016 with a pledge to "bring back hope" to Britain.

Former defence secretary John Healey was made chancellor as part of Burnham's cabinet appointments on Monday.

He replaced Rachel Reeves, who had served as Sir Keir Starmer's chancellor since Labour's 2024 landslide election win.

Burnham's new cabinet is due to meet for the first time at lunchtime on Tuesday.

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