"Around 7 million UK households with high energy use are set to gain the most from a planned 5 % VAT cut on domestic energy bills. The move, currently being discussed by the government ahead of the November Budget, is designed to ease pressure on struggling households. However, analysts say that energy-efficient homes will see much smaller savings, highlighting the uneven impact of the policy. With energy price rises continuing to push bills higher, this measure offers short-term relief for households consuming the most energy, but little relief to energy-efficient homeowners."
"VAT on domestic energy bills is currently a flat 5%, so households that use more energy save more in cash terms. Inefficient homes with poor insulation, older heating systems, such as gas or oil boilers, or multiple occupants stand to benefit the most. Tim Leunig, former government adviser, said: "Most of the benefit would go to people in larger houses with larger-than-average electricity bills." Ed Miliband, Energy Secretary, hinted to the BBC that the government is examining all options to help people with energy bills: "We face a cost-of-living crisis ... so obviously we're looking at all of these issues.""
A proposed 5% VAT cut on domestic energy bills would deliver larger cash savings to households that consume the most energy. Around 7 million high-energy UK households are expected to gain the most, while energy-efficient homes would see much smaller reductions. Nesta estimates average household savings of £86 per year, with high-energy homes potentially saving several hundred pounds, and roughly 10 million efficient homeowners seeing little benefit. Inefficient homes with poor insulation, older heating systems, or multiple occupants are most likely to benefit. The measure is aimed at short-term relief and could take effect after the 26 November 2025 Autumn Budget.
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