VAT will be deducted from electricity bill in October

The Government has announced that VAT will be reduced from household electricity bills as part of new Prime Minister Andy Burnham’s plan to provide cost-of-living relief.

The 5% VAT reduction comes into effect from 1 October, saving the average household around £45 a year.

Ministers have said the £1.8bn over the next three years will be covered by savings if the digital ID scheme is scrapped. The government has announced that advertising could cost £850m this financial year.

New chancellor John Healey said the announcement would “provide some reassurance this summer”.

The announcement comes a day after Burnham became the UK’s seventh prime minister, pledging to “restore hope” to Britain from 2016.

Former defense secretary Healey was appointed chancellor as part of Burnham’s cabinet appointments on Monday.

In the year He replaces Rachel Reeves, who served as chancellor under Sir Keir Starmer after he won the 2024 by-election.

Burnham’s new cabinet will meet for the first time on Tuesday at lunchtime.