Andy Burnham Scraps Digital ID to Cut Energy VAT

Prime Minister Andy Burnham announced the removal of the 5% VAT on domestic electricity bills for a six-month period from October 1, 2026, to March 31, 2027. The measure is intended to provide households with "breathing space" during the winter and is expected to save the average home approximately £45 annually. To fund the £850 million initiative, the government is scrapping a £1.8 billion Digital ID programme previously established under Sir Keir Starmer.

While major energy providers like British Gas and Octopus Energy confirmed they will pass the savings to all customers, financial experts warn the benefit may be negligible. Martin Lewis and other analysts noted that a projected rise in the Ofgem energy price cap—potentially as high as 5.1% in October—could add roughly £93 to typical bills, effectively negating the VAT savings.

The policy has also drawn criticism for creating a "driveway divide" regarding electric vehicles. While home charging will be VAT-free, public charging remains subject to a 20% VAT rate. Industry leaders argue this penalizes the approximately 9 million households without off-street parking. Despite these critiques, the government defended the move as a substantial decision and a significant statement of priorities. The UK's decision has already prompted the Chega parliamentary group in Portugal to propose similar VAT removals on electricity in their own country.