Britain’s energy price cap rose 4% on 1 October, lifting the typical household bill to £1,723 a year (about $2,275). Gas is doing almost all of the damage, while the removal of VAT from electricity is holding power bills roughly flat.

Key takeaways

• The cap for October–December 2026 is £1,723 a year for a typical dual-fuel home paying by direct debit, up £60 (about $79) from £1,663.
• The gas unit rate jumps from 7.33p to 7.97p per kWh (+8.7%), while electricity barely moves because VAT on household electricity has been cut from 5% to zero.
• Analysts at Cornwall Insight already forecast a further 16% rise in January, to about £1,999 a year, as Middle East disruption keeps wholesale gas prices high.

What happened

For readers outside the UK: Ofgem, the energy regulator for Great Britain (England, Scotland and Wales), sets a ceiling every three months on what suppliers can charge for each kilowatt-hour (kWh) and for the daily “standing charge” on standard variable tariffs. It does not cap total bills; households that use more energy pay more. Roughly a third of households, about 11 million according to Ofgem, are on fixed deals and are not directly affected by today’s change.

Ofgem announced the new level on 26 August and it took effect today. The regulator said the main driver is higher wholesale gas prices linked to the conflict in the Middle East. “High international gas prices are continuing to drive energy costs in the UK,” said Neil Kenward, Ofgem’s director general for markets.

The new average rates for direct-debit customers, according to Ofgem figures reported by MoneySavingExpert and Uswitch, are:

• Gas: 7.97p per kWh (about 10.5 US cents), up from 7.33p; standing charge 29.68p a day, up from 29.04p.
• Electricity: 26.32p per kWh (about 34.7 cents), up from 26.11p; standing charge 54.83p a day, down from 57.19p.

The electricity figures reflect a separate government decision. From today, VAT is no longer charged on household electricity bills. The government says this saves an average of £45 a year (about $59), is applied automatically by suppliers, and is funded for the 2026–27 financial year, which ends in March 2027. Gas bills still carry 5% VAT. The government also says around 6 million households qualify for the £150 Warm Home Discount this winter.

Rates vary by region and payment method; the figures above are averages for Great Britain. Northern Ireland has a separate market and is not covered by the cap.

What it means for your bill

Ofgem’s “typical” household uses 2,500 kWh of electricity and 9,500 kWh of gas a year. Here is how the new rates change that household’s annual cost:

• Gas, before: 9,500 × £0.0733 = £696.35, plus 365 × £0.2904 = £106.00, total £802.35.
• Gas, now: 9,500 × £0.0797 = £757.15, plus 365 × £0.2968 = £108.33, total £865.48. That is £63.13 more (+7.9%).
• Electricity, before: 2,500 × £0.2611 = £652.75, plus 365 × £0.5719 = £208.74, total £861.49.
• Electricity, now: 2,500 × £0.2632 = £658.00, plus 365 × £0.5483 = £200.13, total £858.13. That is £3.36 less.

Combined, the bill goes from about £1,664 to £1,724, matching Ofgem’s headline £60 rise (roughly £5 a month). The lesson is that the more gas you burn, the more this change costs you. A larger home using 15,000 kWh of gas a year would pay about £96 more for the unit rate alone (15,000 × £0.0064), while an all-electric flat would see its bill edge slightly lower.

Remember too that the cap is an annualised rate. Because most gas is used between October and March, the extra cost lands mainly in winter bills. If Cornwall Insight’s January forecast proves right, typical bills would climb another £276 a year from 1 January. Ofgem will confirm the January level in late November.

What you can do

• Submit a meter reading today. This makes sure the energy you used in September is billed at the old, lower gas rate rather than estimated at the new one.
• Compare fixed deals. Ofgem says some fixed tariffs are priced more than £100 below the cap. With forecasters expecting a January rise, check the exit fees and compare the fixed price with the expected cap before signing.
• Cut gas use first. Gas is where prices rose. Lowering the thermostat and boiler flow temperature, and heating only the rooms you use, will save more than usual this winter. Our guide on how to save on heating this winter has 15 practical tips.
• Ask about help early. Check whether you qualify for the Warm Home Discount, and if you are struggling to pay, contact your supplier to set up an affordable repayment plan, as Ofgem advises. If you have a smart meter, a time-of-use electricity tariff may also cut costs.

Sources

• Ofgem: Energy price cap will rise by 4% from October 2026
• MoneySavingExpert: What is the energy price cap?
• Uswitch: Energy price cap 2026
• GOV.UK: Breathing space on your energy bill
• EDF: VAT cut on electricity bills
• Cornwall Insight: 16% price cap rise forecast in January
• Trading Economics: GBP/USD exchange rate (conversions at about $1.32 per pound)

Written by The Daily Economy editorial team with AI assistance and checked against the sources above. Read our editorial policy.