A tax cut and a price rise are about to arrive in the same week, and the second one is forecast to be bigger. Ofgem has to publish the October energy price cap by 26 August, VAT on household electricity disappears on 1 October, and most households are still likely to end up paying more. Here is what is actually confirmed, what is only a forecast, and the one thing worth doing before the end of September.

Announcement due	By 26 August, from Ofgem
Cap now (Jul to Sep)	£1,663 for a typical annual dual-fuel bill
October forecast	Around £1,700 (Cornwall Insight, not confirmed)
Electricity VAT	Drops from 5% to 0% on 1 October
VAT saving	Roughly £45 a year on a typical bill
Gas VAT	Unchanged at 5%

What Ofgem Has To Announce, And When

Ofgem confirms the October price cap by 26 August, which means the figure that decides what most households pay from 1 October is due within days. The cap running now, covering July to September, sits at £1,663 for a typical annual dual-fuel bill. Cornwall Insight, the forecaster the industry and most newsrooms rely on, expects the new figure to come in at around £1,700. That is a forecast and not a decision, and it has been wrong before in both directions, but it is the best available guide until Ofgem publishes.

The VAT Cut Is Real And It Is Smaller Than It Sounds

From 1 October, VAT on household electricity drops from five per cent to zero. On Ofgem’s current cap that is worth roughly £45 a year to a typical home. It is a genuine saving and it arrives automatically, with nothing to claim and no form to fill in. The problem is the arithmetic around it. If the cap rises by something close to the forecast, the increase swallows the tax cut and then some, and the bill still goes up.

Gas Keeps Its Five Per Cent

This is the detail most easily missed. The VAT cut applies to electricity only. Gas continues to carry the five per cent rate, which matters enormously because gas is the larger part of most households’ energy spend over a winter. A home heating with gas and lighting with electricity gets the smaller half of the benefit. Anybody on an all-electric tariff or with a heat pump gets considerably more from it than a typical gas-heated house does.

Why The Cap Is Going Up Anyway

Wholesale gas prices rose through the window Ofgem uses to set the cap, driven partly by unrest in the Middle East. Because the cap is calculated from what suppliers actually pay for energy months in advance, the price you see in October reflects a market that has already happened rather than the one you are living in. That lag is why bills can rise when headlines say prices are falling, and it is the single most confusing feature of the whole system.

The Typical Household Assumption Changed Too

Ofgem has also lowered its assumption about how much energy a typical household uses. That quietly reduces the headline figure without anybody’s actual bill changing, because the cap is expressed as what a hypothetical average home would pay. It is worth understanding, because it means a lower headline number does not automatically mean a lower bill. Your bill depends on your usage, not on Ofgem’s model of somebody else’s.

The Cap Is Not A Cap On Your Bill

The most persistent misunderstanding in Britain about energy pricing is that the price cap limits what you can be charged. It does not. It limits the unit rate and the standing charge, and then you pay for whatever you use. A household using twice the assumed amount pays roughly twice the headline figure. The number in the news is a benchmark for comparison, not a ceiling on your account.

Standing Charges Are The Part People Resent

A meaningful share of the cap is the standing charge: a fixed daily amount you pay whether or not you use any energy at all. It covers network costs and, controversially, the cost of supplier failures over the past few years. It falls hardest on low users, which frequently means smaller households and people already being careful, and it is the element that generates the most complaints to Ofgem by a wide margin.

What To Do Before 1 October

Take a meter reading on or close to 30 September and submit it. That fixes the boundary between the old rate and the new one, so a supplier cannot estimate the split in a way that puts more of your usage on the higher price. It takes two minutes and it is the single most useful thing anybody can do. If you have a smart meter sending automatic readings, check the readings are actually going through rather than assuming.

Fixed Deals Are Worth Checking Again

Fixed tariffs have become competitive again, and some are priced below the current cap. Whether fixing is sensible depends on where prices go next, which nobody knows, but the calculation is simpler than people assume: compare the fixed unit rate and standing charge against the cap you would otherwise be on, and decide whether certainty is worth a small premium. Check exit fees before signing anything.

Help That Exists And Goes Unclaimed

The Warm Home Discount, Winter Fuel Payment and Cold Weather Payments all exist and all go partly unclaimed every year. So do supplier hardship funds, which many customers do not know their own company operates. If you are struggling, contacting the supplier early gets a considerably better outcome than contacting them after arrears build, and they are obliged to discuss a payment plan rather than simply demand the balance.

Insulation Beats Every Tariff

The cheapest unit of energy is the one a house does not lose. Loft insulation, draught-proofing and a properly serviced boiler save more over a winter than most tariff switching does, and unlike a fixed deal the saving does not expire. Our guide to energy-efficient home appliances covers the equipment side. Grants exist for some households and the eligibility rules change regularly, so it is worth rechecking even if you were turned down before.

The Wider Picture On Rates And Prices

This lands alongside a broader squeeze. The Bank of England has held rates while warning that inflation is expected to pick up in the second half of the year, and our report on the Bank of England holding rates at 3.75% sets out what that means for households. Energy is one of the largest single line items in most budgets, which is why the October figure carries more weight than its size suggests.

What We Do Not Know Yet

The October cap has not been published at the time of writing. The £1,700 figure is Cornwall Insight’s forecast, not Ofgem’s decision, and forecasts in this market have been wrong by meaningful margins before. What is confirmed is the current cap of £1,663, the removal of electricity VAT from 1 October, and the fact that gas keeps its five per cent. Everything else in the coverage this week is projection, whatever tone it is written in.

The Honest Summary

A tax cut is arriving and a price rise is expected to arrive with it, and the second is forecast to be larger than the first. That is an uncomfortable message and it is more useful than a headline about VAT being scrapped. Anybody budgeting for the winter should plan on paying slightly more from October rather than slightly less, and treat the VAT saving as taking the edge off rather than solving anything.

Final Thoughts

The VAT cut is real and it is not enough. Take a meter reading on 30 September, check whether a fixed deal beats the cap for your usage, and budget for a slightly larger bill rather than a smaller one. We will update this piece once Ofgem publishes the confirmed figure.

This article is general information about energy pricing and is not financial advice. Figures described as forecasts are not confirmed and may change. The October price cap had not been published at the time of writing. Check Ofgem or your supplier for the confirmed rate before making a decision.

Frequently Asked Questions

When is the October 2026 energy price cap announced?

Ofgem confirms it by 26 August. The new rate applies from 1 October and runs to the end of December.

How much is the energy price cap now?

The cap covering July to September 2026 is £1,663 for a typical annual dual-fuel bill. That is a benchmark, not a limit on what you can be charged.

Is VAT being removed from energy bills?

From 1 October, VAT on household electricity drops from five per cent to zero. Gas keeps its five per cent rate, so the benefit is partial.

How much will the VAT cut save?

Around £45 a year on a typical home, based on Ofgem’s current cap. It applies automatically, with nothing to claim.

Will my bill go down in October?

Probably not. Forecasters expect the cap to rise by more than the VAT cut is worth, so most households should budget for slightly higher bills.

What should I do before 1 October?

Submit a meter reading on or near 30 September. It fixes the split between the old and new rates so your usage is not estimated onto the higher price.