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As Chancellor John Healey unveils a £100 energy payment for 20 million households and plans to scrap gas standing charges, homeowners are being warned that the Budget will not stop bills rising by an estimated £276 from 1 January.
Energy consultancy Cornwall Insight forecasts the Ofgem price cap will rise 16% in January to £1,999 a year for a typical household, the biggest increase since January 2023, driven by global gas prices linked to the conflict in the Middle East.
In today’s Budget, the Chancellor confirmed a £100 Household Energy Payment for households in council tax bands A to D, paid directly into bank accounts this winter, and extended the removal of VAT on household electricity until July, which the Treasury says takes around £50 off the annual price cap.
He also announced that gas standing charges, worth around £108 a year, will be abolished for around 23 million homes in 2027 or as soon as possible after. The Treasury estimates around 60% of households will save an average of £45 a year. However, with those fixed costs moving onto the unit rate, the remaining 40%, an estimated 9.2 million households, could end up paying more.
That’s why George Penny, Home Energy Expert at The Solar Co, is urging homeowners to act before January’s rise, sharing six ways households could save up to £994 this winter.
George Penny, Home Energy Expert at The Solar Co, comments:
“Today’s Budget offers some welcome short-term help, but households shouldn’t mistake it for protection against January’s price rise.
“A £100 payment and a £50 VAT saving go some way, but if the cap rises by £276 as forecast, the typical household is still worse off. And the gas standing charge change won’t arrive until 2027 at the earliest, so it does nothing for bills this winter.
“The good news is that there are still simple steps homeowners can take in the next eight weeks that could more than cover the rise.”
Here are our top tips for saving money before January 2027 price hikes:
The £100 Household Energy Payment will go to households in council tax bands A to D in England, with equivalent funding promised for Scotland, Wales and Northern Ireland. You can check your band on your council tax bill or on the gov.uk council tax band checker.
Because the money will be paid straight into bank accounts, make sure the details your council holds are up to date. Fraudsters often use genuine government payment announcements to make scams look convincing, and the average HMRC-related scam costs victims £1,730. You won’t need to give your bank details by text or email to receive it.
If Cornwall Insight’s forecast is right, the price cap will jump from £1,723 to £1,999 on 1 January. Households on a standard variable tariff will feel that rise straight away.
Compare fixed deals now using an Ofgem-accredited comparison site. A fix priced at or close to today’s cap could shield you from up to £276 of the forecast increase over the year. Look closely at exit fees and standing charges, and don’t fix at a price well above the current cap unless the certainty is worth it to you.
If you’re on estimated billing, your supplier may spread December’s usage across the new, higher January rates. Taking a meter reading on 31 December, ideally with a photo as evidence, ensures your winter usage is billed at the correct price.
For a typical household, the forecast rise is worth around £23 a month, so getting one month’s usage billed correctly could save that much.
Scrapping gas standing charges sounds like a straight saving, but those costs will move onto the price you pay per unit, adding just under 1p per kWh. That favours lower users and penalises the biggest gas users.
The break-even point is around 12,500kWh of gas a year. A household using 15,000kWh, typical of a larger or poorly insulated home, could pay around £150 more in unit costs while saving £108 on the standing charge, leaving it £42 a year worse off.
Check the annual gas usage on your latest bill. If you’re above 12,500kWh, now is the time to look at insulation, draught-proofing and heating controls so the change works in your favour.
Most UK boilers are set to flow temperatures of 75°C to 80°C, which is higher than most homes need. Reducing this to 60°C can improve boiler efficiency by up to 9%, worth around £95 a year for a typical dual-fuel household.
It takes a few minutes on the boiler’s control panel and doesn’t make your home any colder. With gas prices set to rise in January, and gas unit rates set to rise again when standing charges are scrapped, it’s one of the quickest wins available.
While the Budget extends the VAT cut on electricity bills, the 0% VAT rate on solar panels is still due to end on 31 March 2027, with a 5% rate expected from April.
A typical 4kW system costs between £7,000 and £10,000 installed, so 5% VAT would add £350 to £500. Installing before the deadline avoids that.
Rising prices also make solar more valuable. A typical 4.5kWp system on a three-bed semi uses around 1,800kWh of its own generation each year, so every 1p rise in the electricity unit rate adds roughly £18 a year to what the panels save you. Spring is the busiest installation period, so homeowners who want panels in place before the deadline should be getting quotes now.
The Budget’s VAT cut applies to household electricity, but not to public chargers, which still carry 20% VAT. That widens the gap between charging at home and charging on the road.
Charging a typical EV at home on a 7p/kWh off-peak tariff costs around £140 a year, compared with around £1,473 at an average public charger rate of 73.63p/kWh. That’s a saving of over £1,300 for drivers who can charge at home. Pay-per-mile road tax of 3p a mile for EVs is still due from April 2028, so cutting running costs now matters more than ever.
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