Andy Burnham has scrapped VAT on household electricity bills, starting from 1 October. Downing Street confirmed the move on 21 July 2026 as one of his first acts as Prime Minister (gov.uk).

The government says the change will give households "breathing space on cost of living." VAT is a tax added to the price of most goods and services. On household electricity, it has stood at 5% since 1997. Removing it entirely breaks from that long-standing arrangement. Reuters confirmed that Downing Street issued its statement on 21 July 2026.

ITV News reported that the policy also includes a small cut to the gas unit rate — the price you pay for each unit of gas used — of 0.3p before VAT. For someone on typical energy bills, the combined effect of both changes amounts to roughly £150 per year (ITV News).

The Independent described the announcement as Burnham's "first major policy announcement" as Prime Minister (The Independent). The BBC examined the policy in a video segment titled "Will Burnham's cut to electricity VAT help households?" in its Politics subsection (BBC News).

Energy taxation is decided by the UK government in Westminster, not by the devolved governments in Scotland, Wales or Northern Ireland. The cut therefore applies to every household across all four nations of the UK. The 1 October start date lines up with the beginning of winter, when households typically use more energy.

The measure builds on an earlier policy. In April 2022, the UK government published its British Energy Security Strategy, which proposed cutting VAT on insulation and heat pumps (gov.uk). That strategy focused on helping people make their homes more energy-efficient. Burnham's announcement extends the idea of cutting VAT from specific energy-saving measures to the electricity bill itself.

The government has not said how much the change will cost the public finances. The 5% rate on household electricity has raised billions of pounds each year. Removing it means the Treasury will need to work out how to replace that money, or borrow more to cover the gap. Neither the gov.uk press release nor the Downing Street statement confirmed by Reuters addressed this point.

The gas and electricity changes are separate. Gas and electricity are billed separately under Ofgem's price cap — a ceiling set by the energy regulator on how much suppliers can charge per unit of energy. The two changes together suggest the government wants to lower costs for both fuel types in one go.

The broader context here is the political messaging. The £150 annual saving is modest compared with typical energy bills, which have been much higher than usual since 2022. The appeal of the policy seems to lie in how visible it is: a VAT rate dropping from 5% to 0% is easy to see on your bill, and the October start date means the saving arrives just as winter energy use begins.

For energy suppliers, the 1 October start date gives about ten weeks to update their billing systems. They will need to show a zero VAT charge for electricity while keeping the standing charge — the fixed daily fee that covers the cost of connecting a home to the energy network. The gas change adds a second adjustment within the same billing period.

By making this his first act, the new Prime Minister has signalled that household energy costs are among his top early priorities. Whether the change survives a full Budget — where the Office for Budget Responsibility, the independent body that checks the government's spending plans, would scrutinise the cost — will depend on whether the Treasury is willing to absorb or offset the lost revenue. No date for the first full Budget under the new administration has been confirmed.