The UK Treasury is reportedly preparing more than £1bn (about $1.33bn) of extra help for low-income households, most likely an extra £100 on top of the £150 Warm Home Discount, as forecasters warn the energy price cap could jump around 16% in January.

Key takeaways

• Chancellor John Healey is reported to be considering lifting the Warm Home Discount from £150 to £250 for households on certain benefits, paid for through general taxation. No decision has been announced.
• Cornwall Insight forecasts the January price cap at about £1,999 a year for a typical household, up £276 (16%) from today’s £1,723.
• Any change would most likely come in the Autumn Budget on 28 October. The current £150 discount is applied automatically to about six million households.

What happened

On 6 October, The Guardian reported that the Treasury is working on a package worth more than £1bn to help energy consumers ahead of this month’s Budget. According to the report, the most likely option is a bigger Warm Home Discount: an extra £100 for eligible households, funded by taxpayers rather than added to everyone’s energy bills. BusinessGreen and other outlets followed up the report on 7 October. Unnamed sources said final decisions have not been made, and a Treasury spokesperson said decisions on tax are for the chancellor to set out at fiscal events.

For readers outside Britain, some background helps. Most UK households on standard variable tariffs pay prices limited by the regulator Ofgem’s “price cap”. The cap does not limit the total bill. It limits the unit rate per kilowatt-hour (kWh) and the daily standing charge, and it is reset every three months to follow wholesale gas and power costs. The cap rose 4% on 1 October to £1,723 a year for a typical dual-fuel household paying by direct debit.

The pressure now is on January. Wholesale gas prices hit a four-year high in early September as conflict in the Middle East disrupted supply, and European gas storage started the autumn well below normal levels. On 30 September, consultancy Cornwall Insight forecast that the January–March cap would reach about £1,999. That would be the biggest quarterly increase since January 2023. The Guardian report mentioned a possible rise of up to £442. Ofgem is expected to confirm the real figure in late November.

Help is already in place. Since 1 October, VAT on household electricity in Great Britain has been cut from 5% to 0% until the end of March 2027. This is estimated to be worth about £45 a year to a typical household. Gas is still taxed at 5%. The government has also confirmed the £150 Warm Home Discount for winter 2026–27.

What it means for your bill

Here is a worked example for a typical household using 2,500 kWh of electricity and 9,500 kWh of gas a year. It uses Ofgem’s average direct-debit rates for October–December and Cornwall Insight’s forecast rates for January–March.

• Today (Oct–Dec cap): electricity 2,500 × 26.32p = £658.00, plus a standing charge of 365 × 54.83p = £200.13. Gas is 9,500 × 7.97p = £757.15, plus 365 × 29.68p = £108.33. Total: about £1,723 a year (about $2,290).
• Forecast (Jan–Mar cap): electricity 2,500 × 30.28p = £757.00, plus 365 × 55p = £200.75. Gas is 9,500 × 9.76p = £927.20, plus 365 × 31p = £113.15. Total: about £1,998 a year (about $2,660).
• Difference: about £275 a year at January rates. The cap applies one quarter at a time, so if consumption were spread evenly the January–March extra would be about £69 (£275 ÷ 4). In practice it will be higher because heating use peaks in winter.

Now look at what the support would cover. The current £150 discount equals about 55% of the annualised £275 rise. A £250 discount would cover about 91% of it. Put another way, at forecast January rates a typical eligible household would pay about £1,748 a year after the discount (£1,998 − £250). Without the extra £100 it would pay about £1,848. Households that do not qualify would get nothing from this measure and would face the full increase. Your own bill depends on your region, meter type, payment method and how much energy you use.

What you can do

• Check that you are named on your electricity account. In England and Wales the Warm Home Discount is paid automatically to bill payers who get Pension Credit or certain means-tested benefits, but only if the name on the account matches government records. In Scotland you may need to apply to your supplier.
• Compare fixed deals before late November. Uswitch said in late August that some fixed deals were priced well below the cap, and January forecasts are higher still. Check exit fees, and compare the fixed price with the cap forecasts, not only with today’s cap.
• Submit a meter reading on or just before 31 December if you do not have a working smart meter, so that energy you used in December is not billed at January’s higher rates.
• Cut heat loss cheaply now. Draught-proofing and small changes to your thermostat settings pay back fastest when unit rates are high. See our guide to saving on heating this winter and our weatherstripping guide.

Sources

• The Guardian (via AOL): Chancellor plans major intervention to help poorer UK households with rising energy bills
• BusinessGreen: Treasury preps additional energy bill support for low income households
• Cornwall Insight: 16% price cap rise forecast in January
• Ofgem: Summary of changes to the energy price cap, 1 October to 31 December 2026
• Uswitch: October 2026 price cap unit rates and standing charges
• GOV.UK: Warm Home Discount Scheme
• ITV News: VAT cut on household electricity from October
• Civil Service World: Healey sets October date for Autumn Budget

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