Budget 2026 and Your Energy Bills: What Changes and When
The Budget on 28 October 2026 changes your energy bills in four ways. Ofgem will scrap the gas standing charge. Electricity stays VAT-free until 1 July 2027. Homes in Council Tax bands A to D get £100. And the government won't add new policy costs to bills. Add those up and a heat pump now costs less to run than gas.
Geek Notes
Ofgem will scrap the £108 gas standing charge by the end of 2027 and add the cost to each unit of gas. Electricity stays VAT-free until 1 July 2027, bands A to D get £100 from January, and no new levies go on bills. Lower gas users pay less for gas, higher users a little more. A heat pump now costs less to run than gas in a typical home.
What Changes and When
| When | What changes |
|---|---|
| Now | You pay no VAT on electricity |
| From January 2027 | £100 Household Energy Payment for Council Tax bands A to D in England |
| January 2027 | Forecasters expect the price cap to rise by around 27% |
| April 2027 | The VAT extension takes about £50 off the price cap |
| Until 1 July 2027 | Electricity stays VAT-free (the cut was due to end in March) |
| 2027-28 | The Boiler Upgrade Scheme continues: £7,500 off a heat pump, or £9,000 for homes on oil or LPG (England and Wales) |
| By the end of 2027, or soon after | Ofgem scraps the gas standing charge and moves the cost into the gas unit rate |
| 2028 to 2030 | The government cuts Britain's exposure to international gas prices |
The Gas Standing Charge Goes
You pay the standing charge every day for your gas supply, whatever you use. It costs about £108 a year.
The government will ask Ofgem to remove it by the end of 2027 or soon after. Most experts expect the change with the October 2027 or January 2028 price cap. Ofgem will add the cost to the price of each unit of gas, which should come to about 1p per kWh.
What it means for you:
- Lower gas users pay less. The government expects around 60% of households to come out ahead.
- Higher gas users pay a little more. The dividing line should fall between 9,500 and 12,500 kWh of gas a year, and your annual statement shows your use.
- Fixed tariffs stay as they are. Your current deal won't change.
- The government will help higher users. It says it will set out support for households that don't see a saving.
You'll keep paying the electricity standing charge for now. The government says it will reform that next.
Electricity Stays VAT-Free Until July 2027
The 0% VAT on electricity now runs until 1 July 2027, three months longer than planned. The government says that takes about £50 off the annual price cap in April 2027. Your supplier applies it for you.
The £100 Household Energy Payment
Households in Council Tax bands A to D in England get £100, paid into their bank account from January 2027. Scotland, Wales and Northern Ireland have funding for similar support. See who qualifies and how to check your band.
The January Price Cap
Forecasters expect the price cap to rise by around 27% in January, though Ofgem hasn't confirmed the figure. The £100 payment covers about the extra cost from January to March. We'll update this page when Ofgem announces the new cap.
No New Costs on Your Bills
The government won't add new policy costs to energy bills unless they bring bills down or keep the lights on. That holds until it sets a new Cost Control Framework at the 2027 spending review. It has also scrapped a planned levy on gas bills that would have paid for hydrogen.
Cheaper Electricity From 2028
From 2028 to 2030, the government plans to cut Britain's exposure to volatile international gas prices. It's consulting on breaking the link between electricity and gas prices, and it will remove a carbon tax on gas power stations from April 2028. Both should bring electricity prices down.
What It Means for Heating Your Home
These changes tip the numbers towards heat pumps. Read the full story.
Scrapping the standing charge adds about 1.14p to every unit of gas, and electricity gets no new levies. Both changes lower the efficiency a heat pump needs to beat an 85% efficient gas boiler.
On January's forecast prices, a heat pump needed a SCOP of about 3.2 to heat your home for less than gas. After the Budget, it needs about 2.8. Heat Geek designs run from 3.4 to 5.0, and we guarantee the figure in your quote.
For a typical home after the Budget:
| Home | Gas after the Budget | Heat pump, price cap | You save | Heat pump, Cosy Octopus | You save |
|---|---|---|---|---|---|
| Small (flat or 2-bed terrace) | £638 | £487 | £151 a year | £427 | £211 a year |
| Medium (3-bed semi) | £865 | £661 | £205 a year | £579 | £287 a year |
| Large (4-bed or detached) | £1,412 | £1,078 | £334 a year | £945 | £467 a year |
Estimates for a typical home with a heat pump at SCOP 3.7, using the Ofgem price cap and the January 2027 forecast. Your home and tariff will change the figures.
See what the Budget means for your home. Our Budget 2026 heat pump calculator shows your gas bill, your heat pump bill and the gap between them. Pick your home size and tariff to start.
Bigger homes save the most. They burn the most gas and feel the unit rate rise hardest, while a heat pump burns none.
You'll pay less to keep a gas hob as well. Today you pay the full £108 standing charge to cook on gas. Once Ofgem scraps it, cooking on gas costs about £27 a year.
In England and Wales, the Boiler Upgrade Scheme takes £7,500 off a heat pump, or £9,000 if your home runs on oil or LPG. The Budget confirmed it through 2027-28. In Scotland, you can apply for the Home Energy Scotland grant instead. The new Warm Homes Loan Scheme lets you spread the rest. See which grant you can get. After the £7,500 grant, Heat Geek installs in England and Wales start from £5,200 for a small home, £6,600 for a 3-bed semi and £8,100 for a 4-bed or detached home.
A heat pump can work in almost any UK home with the right design. If yours is the exception, or a heat pump won't save you money, we'll tell you before you spend anything.
Get your personalised heat pump estimate
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Why Heat Geek
- The right design. We design every system around your home, balancing what you pay upfront against what it costs to run.
- The right installer. A certified Heat Geek from your area fits it, trained and verified to our standard.
- The right result. You get our performance guarantee, a warranty of up to 10 years and monitoring of your heat pump from day one.
Local to you, backed by us.
Sources
- GOV.UK: Budget 2026: Breathing space for today, hope for the future
- Citizens Advice: What the Autumn Budget 2026 means for you
Last updated 28 October 2026. We'll update this page as Ofgem confirms dates and rates.
