October Energy Price Cap: New Rates, the VAT Cut and What to Check

Oct 1

6 min read

Al Baker | Founder & Editor, The Penny Pincher - Last updated 1st October 2026

October energy price cap rates and the electricity VAT cut explained for household bills.

Last checked: the 1st of October 2026. This is general information, not personal financial advice.

As the evenings get colder and the heating starts going back on, it’s worth opening your energy account to see what you’re paying. The new October energy price cap is now in place, alongside a temporary cut to the tax on household electricity. That gives you two changes to check, and they won’t affect every home in the same way.

For a household using a typical amount of gas and electricity and paying by Direct Debit, the cap is now £1,723 a year, up from £1,663. That’s a £60 increase, or about 3.6%, often rounded to 4%. It isn’t a maximum bill: use more energy and you’ll pay more, while using less should mean a lower bill.

Check your supplier’s own rates and terms before changing tariff.

What are the October energy price cap rates?

Ofgem, the energy regulator for Great Britain, sets the cap for households on default tariffs, often called standard variable tariffs. The current period runs from the 1st of October to the 31st of December 2026. It covers England, Scotland and Wales; Northern Ireland has a separate energy market.

Your bill has two main parts: the energy you use and a daily standing charge. Energy use is measured in kilowatt hours, usually written as kWh, and the standing charge is payable even on days when you don’t use any energy. These are the national average Direct Debit rates published by Ofgem, so use its regional figures or your supplier’s tariff notice to check your own account.

Gas is the bigger change compared with the previous quarter: its average unit price has gone from 7.33p to 7.97p per kWh. Electricity has moved from 26.11p to 26.32p per kWh, while its average daily standing charge has fallen from 57.19p to 54.83p. These are the published customer rates, with the new electricity VAT treatment already included, so don’t take another tax discount off the October figures.

Why can your bill be higher than £1,723?

The £1,723 figure is a way of illustrating the cap using typical annual consumption, rather than a promise about what your household will spend. The current benchmark uses 2,500kWh of electricity and 9,500kWh of gas a year. A larger home, longer heating hours or different household needs can mean your usage is quite different.

It also isn’t a bill for the three months from October to December, or a guaranteed price for the next 12 months. The cap is reviewed every three months, and the amount of energy you use changes through the seasons. That’s why dividing £1,723 by 12 won’t necessarily tell you what your monthly payment should be.

Look for your annual gas and electricity consumption in your supplier’s app or annual statement before comparing another deal. Enter the same figures each time, so a lower quote reflects cheaper rates rather than an assumption that you’ll use less. For example, an electricity rate of 25p per kWh would cost £250 for 1,000kWh of use, before the standing charge is added.

How does the electricity VAT cut work?

VAT, the tax added to many goods and services, has temporarily fallen from 5% to 0% on qualifying household electricity in Great Britain. The reduction runs from the 1st of October 2026 to the 31st of March 2027 and covers both electricity use and the electricity standing charge. Gas still carries 5% VAT, while qualifying electricity in Northern Ireland remains at 5%.

You don’t need to fill in a form or apply for the saving. Under the government’s electricity VAT guidance, suppliers apply the change, including for customers on fixed tariffs and prepayment meters. If a bill spans the changeover and the tax calculation isn’t clear, ask your supplier to explain which charges relate to each period.

The government puts the benefit at around £45 when expressed over a year, but the currently funded tax reduction lasts six months. It isn’t a £45 payment into your bank account, and you shouldn’t subtract £45 from the published cap. The cap already reflects the change, while your own saving depends on your electricity costs during the period the zero rate applies.

What if you’re already on a fixed tariff?

A fixed tariff normally keeps your agreed unit rates and standing charges in place for the contract term. October’s price-cap increase doesn’t move those underlying rates up to the new cap, but the electricity VAT reduction still applies. Your total bill can still change if you use more energy, so a fixed tariff doesn’t mean unlimited heating for a fixed monthly price.

If your deal ends soon, put a reminder in your phone and check what your supplier plans to move you onto. Compare the replacement with other available offers using your annual consumption, and read the contract length and any exit fees. Keep account credit or debt separate from that comparison, because either can change the Direct Debit your supplier asks you to pay.

Is it worth fixing your energy prices now?

A fix can be useful if you want more certainty about your rates, but the price and terms need to work for your household. Compare both fuels, both standing charges and any charge for leaving your existing deal. A tariff with a lower unit price and a higher standing charge can produce a different result for someone who uses very little energy than for a household with much higher usage.

The January cap hasn’t been confirmed, so a prediction about rising bills isn’t a guarantee of what you’ll pay next year. Ofgem is due to announce the next level by the 25th of November. Judge a fixed offer on the costs you can check now, along with how comfortable you are with rates changing if you stay on a variable tariff.

Before completing an eligible switch, it can also be worth checking whether a cashback offer is available through a route such as TopCashback or Quidco. Compare the tariff itself first, then check which deal qualifies, how you need to apply and any exclusions; cashback isn’t guaranteed until it’s confirmed.

Our cashback websites guide explains how those services work, but don’t choose a more expensive energy contract just for a joining reward.

What if you’re struggling to afford your energy bills?

Contact your supplier as soon as you can see a problem, even if you haven’t missed a payment yet. Ofgem’s guidance on the October changes makes clear that suppliers must help customers who ask for support when they can’t pay. Explain what you can afford and ask about repayment arrangements, emergency credit where relevant and any other help available.

The £150 Warm Home Discount is separate from the electricity VAT cut, so receiving one doesn’t rule out the other. Check the government’s Warm Home Discount information for eligibility and the process where you live. It’s also worth checking whether changes to your income or circumstances mean you qualify for other benefits or support.

If several bills are becoming difficult to manage, StepChange offers free debt advice and can help you work through what you owe. You don’t need to wait until the situation becomes unmanageable before asking. Start with the payments needed to keep your home and household running, rather than agreeing to a repayment amount that leaves you short for other essentials.

For keeping track of bills, our Monzo review explains one app-based option, although you can also use your existing accounts or a spreadsheet. If there’s money left after essential spending, our guide to emergency funds looks at setting some aside for unexpected costs. For now, open your energy account, check the tariff and VAT treatment, and contact your supplier if either the figures or the payment look wrong.

Frequently asked questions

What is the energy price cap from the 1st of October?

The October-to-December cap is £1,723 a year for typical dual-fuel use paid by Direct Debit in England, Scotland and Wales. It limits the rates on default tariffs, not your total bill.

What are the October energy price cap rates?

The national Direct Debit averages are 26.32p per kWh and 54.83p a day for electricity, plus 7.97p per kWh and 29.68p a day for gas. Actual rates vary by region and payment method.

Does the energy price cap include VAT?

The published October gas rates include 5% VAT. Qualifying domestic electricity in Great Britain is temporarily at 0% VAT from the 1st of October 2026 to the 31st of March 2027, and that change is already reflected in the cap.

Does the electricity VAT cut apply to fixed tariffs?

Yes, qualifying household electricity on fixed tariffs and prepayment meters is included. Suppliers apply the tax change, so you don’t need to submit a claim.

Should I fix my energy tariff now?

Compare the offered rates and standing charges using your own annual energy use, then check the term and exit fees. A fix provides more certainty about rates, but it doesn’t guarantee the lowest bill or protect you from spending more if you use more energy.