uSwitch calls for an end to energy VAT

uSwitch calls for an end to energy VAT

The move would help to stem the growing tide of people going cold in the winter, take an estimated 250,000 households out of fuel poverty and would see energy zero-rated for VAT like most other essential items, such as water.

Currently customers do not pay VAT on water and basic foods, but are charged 5% VAT on their gas and electricity.

The average household energy bill is an eye-watering £1,259 a year despite recent price cuts by energy companies which took an average of £34 off bills.

Removing VAT from energy bills would save households £60 a year and could also be a lifeline for the 19.5 million households that have gone without heating at some point this winter to keep their energy costs down.

Why do we pay VAT on energy?

Household energy is an essential item, but unlike water and basic foods it is not zero-rated for VAT, with most households paying 5% VAT on their energy bills.

Axing the VAT on household energy bills would cost the Government an estimated £1.6 billion, but would put money back into people’s pockets, benefitting almost every household including the ‘squeezed middle’, the ‘working poor’ and those in fuel poverty, without the need for means testing.

90% named the cost of energy as their top household worry for customers, ahead of the rising cost of food (77%) and mortgage payments (42%), proving that a universal reduction in bills would provide immediate relief.

Ann Robinson, Director of Consumer Policy at uSwitch, said: “Removing VAT from our energy bills would help to alleviate the growing financial pressure that consumers are coming under, enable many more to keep warm in the winter and snatch 250,000 households from the grip of fuel poverty.

“When added to the recent £34 price cut made by suppliers, the removal of VAT would see household energy bills tumble by almost £100 a year.

"I would urge the Government to consider this step as it is a win-win for them and for consumers and could potentially kick-start a more energy efficient future.”