Your Energy Bills Are Going Up Again — Here's Why and What Help Is Coming

The UK's energy regulator, Ofgem, has confirmed that the energy price cap will go up by 4% from 1 October to 31 December 2026. The cap — which is a limit on how much energy companies can charge households on standard plans — will be set at £1,723 per year for a typical home that pays by Direct Debit (Ofgem). This follows a 13% rise that started in July, which Ofgem linked to global energy price increases caused by the US war on Iran and the closure of the Strait of Hormuz, a key shipping route for oil and gas (Ofgem). Energy analysts at Cornwall Insight expect the October cap to be the highest in three years (Reuters.

UK government sources said households are unlikely to get further broad help with energy bills before October. However, targeted support could be considered if prices jump again in January (The Guardian). The main help coming is the removal of the 5% VAT — a type of sales tax — on home electricity bills. Prime Minister Andy Burnham announced this in his first week in office, and it takes effect on 1 October. The Treasury expects this tax cut to lower the annual price cap by about £45. That comes on top of roughly £150 already taken off average bills through Budget 2025 measures that began in April (GOV.UK; GOV.UK).

Burnham said rising bills were "difficult for people" but did not promise any further help beyond the VAT cut (The Guardian). Energy secretary Miatta Fahnbulleh said the Iran war was pushing bills up and that the government would "keep looking at what more could be done to protect families from unaffordable bills." Chancellor John Healey said the government would look again at whether more support was needed towards the end of the year. Government sources said any extra measures would need to be budgeted for, with officials waiting to see how the Gulf conflict develops.

The broader context here is about strategy. The government seems to be easing immediate pressure through the VAT cut while keeping its options open for January, when forecasts from Cornwall Insight cited by the Resolution Foundation suggest bills could rise by up to 9%. That approach fits a Treasury logic of waiting to see how the Gulf conflict unfolds before committing to new spending.

The Resolution Foundation, a research group focused on living standards, recommended that targeted support be designed and costed now, ready to switch on in January if needed. Its plan would help households earning under £24,000 a year — about 40% of households — with potential average savings of £175 for eligible families (The Guardian). The group's argument is that the planning work should happen now, even if the money is not paid out until later.

The Trades Union Congress, which represents Britain's unions, repeated its call for a windfall tax — a special one-off tax on what are seen as unusually high profits — on banks to fund energy bill cuts. TUC general secretary Paul Nowak said the government should look at funding options now, including taxing bank profits, to give households more help this winter (The Guardian).

This approach also differs from the work of former chancellor Rachel Reeves, who before Burnham became prime minister had been preparing targeted energy-bill support. Reeves told Parliament in March that she wanted a targeted plan in place by autumn. The switch to the Burnham government appears to have replaced that more detailed plan with the VAT cut, at least for now.

For perspective, the price cap is still well below its crisis peak. The cap for a typical household rose from £1,277 in winter 2021-22 to over £4,000 by the start of 2023 (GOV.UK). The October 2026 figure of £1,723, before the £45 VAT reduction, is far below that peak but still above pre-crisis levels. Separately, households eligible for the £150 Warm Home Discount through benefits were required to be named on their energy bill by 23 August to qualify (GOV.UK).

The political stakes for the Burnham government are heightened by two pressures: the effect of Gulf-driven gas prices, and the short gap between the October cap and the January review. If the Strait of Hormuz disruption continues or worsens, the 9% January rise scenario becomes likely rather than unlikely, and the financial room gained by waiting shrinks considerably. The Resolution Foundation's call for pre-planned support is, at its core, a bet that waiting will cost more than preparing now.