Households have been offered further support with energy bills in the autumn Budget, including a new £100 payment for eligible homes in Council Tax bands A to D, an extension to the temporary VAT cut on electricity and plans to remove gas standing charges. However, the price cap rose by 4% to £1,723 a year at the beginning of October, and current forecasts suggest it could rise again in January, potentially reaching around £2,130 for a typical household.
For many households, the support announced may not fully offset the effect of further price rises in the short term. Experts at MoneySuperMarket Energy have examined the latest initiatives and urged households to be proactive and consider fixing their energy tariffs.
£100 energy payment for households
A £100 one-off payment will be made directly to people's bank accounts to help with the rising cost of energy in England, with funding for similar support provided to the rest of the UK. Wales and Scotland have already confirmed that households will get the payment, while Northern Ireland needs to set its overall budget first. Those in Council Tax bands A to D will be eligible.
Laura Hinton, from MoneySuperMarket Energy, said: “Any help with rising energy bills will be welcomed by households, and the £100 payment should provide some breathing space for eligible homes this winter. However, current forecasts suggest the January price cap could rise to around £2,130 a year for a typical household, so the payment may not fully offset higher costs.”
She added: “All signs are currently pointing towards a significant increase to the price cap at the beginning of next year, with those on standard variable tariffs the most at risk to price hikes. While below-cap fixes have become less common, there are some fixed deals available below January's predicted price cap that could be worth considering to protect yourself from future price rises.”
The current cheapest 18-month fixed deal from a major supplier is the E.ON Next 18m Exclusive v2, with an average annual cost of £1,899, potentially saving households up to £231 a year compared to January's predicted cap rate.
Gas standing charges to be scrapped
The annual gas standing charge, which averages £108 a year, is set to be removed for around 23 million homes, with Ofgem aiming to deliver it in 2027 or as soon as possible after. The cost moves into the unit price of gas. The Treasury estimates that 60% of households will benefit, with lower users gaining most and higher users potentially paying more.
Laura said: “Scrapping the annual standing charge on gas bills, which currently costs households £108 a year on average, will be welcome news for many, particularly lower energy users. The Treasury estimates that 60% of households will benefit.”
She continued: “The change won't come in until 2027 at the earliest. While households currently pay £108 a year on average in gas standing charges, that doesn't translate into an equivalent saving. The cost is being shifted into the unit price of gas, meaning how much you use will matter even more and some higher-use households could end up paying more. The best thing people can do is look at their total energy costs rather than one part of the bill and compare their tariff against the deals available to see whether they could save.”
Warm Homes Loans and VAT cut extension
Ten lenders are offering government-backed no and low-interest loans for solar panels, batteries and heat pumps, available across the UK. Loans run up to £15,000 for solar panels and/or battery, up to £20,000 for an air-to-water heat pump and up to £35,000 for ground source. Rates are cut by up to 5% against standard loans.
The Government says a heat pump, battery and solar panels together could save up to £550 a year, rising by a further £300 on a time-of-use tariff. The loans can be combined with Boiler Upgrade Scheme grants of up to £9,000.
Laura said: “Generally speaking, high upfront costs are a significant barrier for people looking to install solar panels or a heat pump. While these measures could help households reduce their reliance on traditional energy sources, the initial investment can be substantial.”
She added: “That's why it's important to consider the upfront cost alongside the potential longer-term benefits, including when you might see a return on your investment. While these loans could help make these improvements more affordable by spreading the upfront cost, households should consider their own circumstances and whether the repayments are manageable.”
On the VAT cut, Laura said: “The Treasury has announced that the cut on VAT for the electricity scheme introduced earlier this month will be extended further into 2027. The move currently saves customers an estimated £50 a year on their energy bills, but it's worth noting this is already factored into the prices you see by energy providers, so is unlikely to bring headline prices down further.”
What households should do now
Laura said: “The measures announced should provide some welcome help, but energy bills are still forecast to rise again in January. For some households, Government support may not fully offset those higher costs.”
She concluded: “Currently, most analysts are predicting energy bills to remain higher for most of 2027. That means fixing your energy tariff could provide greater certainty over their monthly costs and may help reduce bills compared with remaining on a standard variable tariff, depending on your circumstances. While fixed deals below the current price cap have become less common in recent weeks, there are still tariffs available below January's forecast, meaning switching today could save you hundreds come the new year.”
