Budget 2026: What Changes for Energy Bills, Heat Pumps and Landlords

Chancellor John Healey's Budget on 28 October 2026 focused on energy bills. Electricity in Great Britain stays VAT-free until the end of June 2027. Most homes in England will get a £100 Household Energy Payment from January. Gas standing charges will be scrapped.

For anyone planning home upgrades, the changes are less generous. The Budget takes £1 billion of grant funding out of the Warm Homes Plan. The heat pump grant budget for 2027-28 is a third lower than planned. And the 0% VAT rate on insulation, heat pumps and solar panels ends on 31 March 2027, as planned. Landlords face higher tax on rental income from April 2027.

This guide covers what changes for your home, and when.

Last checked against the Budget 2026 document, HMRC's overview of tax legislation and rates, and other GOV.UK and Ofgem pages on 28 October 2026.

Budget 2026 at a glance

Energy bills: what changes and when

0% VAT on electricity extended to 30 June 2027

VAT on household electricity was cut from 5% to 0% on 1 October 2026 for six months. The Budget extends it by three months, so the 0% rate now runs until 30 June 2027. The 5% rate returns on 1 July 2027.

The Treasury expects the extension to take around £50 off the annual price cap in April 2027. It applies to all household electricity in Great Britain, including fixed tariffs. Northern Ireland is expected to get the same relief from April 2027.

Gas still carries 5% VAT.

£100 Household Energy Payment

• Who gets it: households in England in council tax bands A to D. That is up to 20 million homes, about 80% of households in England.
• When: from January 2027.
• How: councils will deliver it through the council tax system. The Budget calls it both a direct payment and a council tax rebate, so check your council's website from January for how it will reach you.
• Higher bands: councils in England get an extra £100 million to help struggling households, including some in bands E and above.
• Scotland, Wales and Northern Ireland: their governments get funding through the Barnett formula to provide similar support. They will announce their own plans.

You can check your council tax band on GOV.UK. Be wary of texts or emails asking you to "apply" for the payment. If your council does need bank details, give them only through its own website, never through a link in a text or email.

Gas standing charges will be scrapped

The gas standing charge is a fixed daily fee you pay even if you use no gas. Under the October to December 2026 price cap it averages 29.68p a day, or about £108 a year, for Direct Debit customers.

The government has asked Ofgem to abolish gas standing charges on household bills in Great Britain, aiming for the end of 2027 or as soon as possible after then. Suppliers will recover the same costs through the gas unit rate instead.

Will you save? The government estimates that 60% of households with a gas account could save around £45 a year on average. The rest will not see an automatic saving. The government says it will set out targeted help for "a small number of households" who lose out.

The cost moves onto every unit of gas, so homes using less than average save and heavier users pay more. Average use is about 11,200 kWh a year. Using government meter data, we estimate the typical home rated A to D comes out ahead, while the typical E- or F-rated home pays a little more. See who saves and who pays more when gas standing charges go for the figures by gas use and EPC band, and how to check your own bill.

Electricity standing charges will also be reformed, with details due next year.

Other changes to bills

• No new policy costs on bills until a new Cost Control Framework is set at the 2027 spending review. This applies unless a cost brings bills down or is essential for security of supply.
• The planned Gas Shipper Obligation is scrapped. This was a new levy on gas bills to pay for hydrogen projects. The government will fund those projects from public money instead.
• Energy debt: a new strategy from the government and Ofgem includes a one-off debt relief scheme for eligible households, launching next year.
• Heating oil: import tariffs on kerosene heating oil are suspended from 26 November 2026 to 31 December 2028. The Budget does not estimate how much this will save oil-heated homes.

Heat pumps, solar and insulation: what changes

VAT on energy-saving materials returns to 5% on 1 April 2027

Energy-saving materials installed in homes currently have a temporary 0% VAT rate, introduced in 2022. It covers insulation, heat pumps, solar panels, batteries and heating controls. HMRC confirmed at the Budget that the rate returns to 5% on 1 April 2027, as planned when the 0% rate was introduced.

What 5% means in practice: the median air source heat pump installation cost £12,908 in April to June 2026, according to Boiler Upgrade Scheme statistics. At 5%, VAT on that job would be about £645.

Two other points:

• Heat batteries are not on HMRC's list of energy-saving materials today, so they do not get the 0% rate. They are due to qualify for the 5% rate from 1 April 2027, once the legislation is laid. For most heat battery installs, VAT should fall from 20% to 5%.
• Windows and doors are not energy-saving materials for VAT, so they stay at 20%. See our double glazing and EPC guide.

If your project might finish close to the deadline, ask your installer before you sign which VAT rate will apply. Our guide to the VAT change lists what rises to 5% and what it adds to typical costs.

Heat pump grant: same £7,500, smaller budget than planned

The Boiler Upgrade Scheme (BUS) grant amounts have not changed. In England and Wales it pays £7,500 towards an air or ground source heat pump, or £9,000 for off-gas-grid homes on oil or LPG until 31 March 2027.

What has changed is the money behind the scheme:

The Treasury says the government "remains committed to heat pump deployment". Demand is at a record high: Ofgem issued 5,903 vouchers in August 2026, the most in any month since the scheme began. But 43% of them were for the temporary £9,000 grant, which ends on 31 March 2027. Here is what that means for £400 million:

• A full year at August's pace, at £7,500 a voucher, would be worth about £530 million.
• At the April to August 2026 average (20,393 vouchers in five months), it would be about £370 million.

Not every voucher ends up being paid, so £400 million looks tight rather than clearly short.

Vouchers are issued first come, first served until each year's budget runs out. The Budget did not say whether more money would be added if demand rises. The January plan said the government would "keep the grant level and eligibility of BUS funding under review".

If you are planning a heat pump anyway, two dates matter:

• 31 March 2027: 0% VAT ends, and the £9,000 off-gas grant is available until then. Ask your installer what has to happen by that date for the grant and for the VAT rate.
• 1 April 2027 starts the first year of the smaller budget.

Since April 2026 you no longer need a valid EPC to get the grant: GOV.UK's eligibility rules now only require that you own the property and are replacing fossil fuel heating. Your EPC is still a useful guide to how much heat your home loses and what to fix first, so check it with the lookup above. See our air source heat pump cost guide.

Warm Homes Plan: £1 billion of grant funding cut

The energy department is moving money towards defence, and the Budget says the government will "save £1 billion capital grant from the Warm Homes Plan". The January 2026 plan was worth £15 billion.

The Treasury says the majority of funding for low-income households and social housing, delivered by mayors and councils, is protected. The Budget does not break the £1 billion down further. For comparison, the new heat pump grant budget is about £760 million below the January plan over the three years to 2029-30, assuming inflation of 2% to 3%. The Budget does not say how the £1 billion splits between schemes, so this is a comparison, not a breakdown.

Separately, some money from the Warm Homes Fund, the plan's loans and investment fund (announced at £5 billion), will help pay for the new first-time buyer scheme. The energy department will also explore "the use of guarantees rather than loans".

What it means for each scheme:

• Warm Homes Loan Scheme: launched this month with 10 lenders. The Budget cites it as part of the government's support for heat pumps, and announced no changes to it.
• Warm Homes: Local Grant: no change announced. Availability already varies by council.
• ECO4: still closes on 31 December 2026, with no successor scheme.

Landlords: higher tax on rental income, no change to EPC rules

Tax on property income rises from 6 April 2027

Budget 2025 had already announced separate tax rates for property income, 2 percentage points above the normal rates, from April 2027. Budget 2026 adds another 2 points. From 6 April 2027:

• It applies to individual landlords and partnerships in England, Wales and Northern Ireland. Companies pay Corporation Tax instead. Scotland sets its own rates, and Wales can set its own.
• Mortgage interest relief stays tied to the property basic rate, so it will be given at 24%.
• Example: £10,000 of rental profit taxed at the basic rate would cost £2,400 a year in tax, up from £2,000.

If you are thinking about moving properties into a company, get tax advice first. Company-owned homes cannot use the Warm Homes Loan Scheme, which only lends to landlords borrowing in their own name.

Other tax changes for landlords

• Making Tax Digital: landlords and sole traders whose qualifying income was over £30,000 in 2025-26 must start using Making Tax Digital for Income Tax on 6 April 2027. Those over £50,000 should already have started in April 2026. The Budget says the April 2027 group will get no penalty points for late quarterly updates in 2027-28. The updates still have to be sent before you can file your tax return.
• Paying tax during the year: from April 2029, Self Assessment taxpayers who make payments on account will pay smaller amounts more often through the year.
• Rental income data: HMRC is consulting on collecting more information about rental income directly from third parties.
• Trading allowance: rises from £1,000 to £3,000 from 6 April 2027. It covers trading and some miscellaneous income, not rent. The Budget did not announce any change to the separate £1,000 property allowance for rental income.
• Homes worth £2 million or more: the High Value Council Tax Surcharge starts in England in April 2028. Owners pay it, not tenants, at £2,500 to £7,500 a year depending on value. The Budget confirmed a deferral scheme, discounts and exemptions, and a 100% premium on homes left empty for 12 months or more.

EPC rules are unchanged

The Budget did not change the rules on energy efficiency in rented homes:

• Today's law: most private rentals in England and Wales need at least EPC E, and the maximum penalty is £5,000 per property.
• Proposed for 2030: the government intends to require EPC C by 1 October 2030, with a £10,000 cost cap and penalties of up to £30,000. This is government intention set out in January 2026. Legislation is still to follow.
• No new tax relief for landlords' energy-efficiency work was announced.

The Budget's policy table also mentions a landlord registration fee for the private rented sector, without giving an amount.

Our landlord EPC requirements guide covers the current rules and the 2030 proposals.

Buying your first home

The new Your First Home scheme offers 20% government equity loans to first-time buyers of new-build homes in England. The Budget says it will help around 70,000 households.

• Deposit: at least 2.5%, up to a maximum of 15%.
• Income caps: £110,000 per household, or £140,000 in London.
• Price caps: set by local median prices. The caps are £650,000 in inner London and £500,000 in outer London.
• Interest: the equity loan is interest-free for five years.
• Opens: pre-registration by the end of December 2026, full applications from February 2027 and first loans from April 2027.

Also announced:

• From 29 October 2026, the Lifetime ISA withdrawal charge falls to 20% for first-time buyers purchasing above the £450,000 price cap.
• A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029.

Every new-build home must have an EPC once it is finished, so check the rating before you commit. See our first-time buyer's guide to EPCs.

Key dates

What to do now

1. Check your council tax band if you live in England. Bands A to D get the £100 payment from January.
2. Heavy gas user? Check what your EPC recommends. Cutting gas use will be worth more once the standing charge moves onto the unit rate.
3. Planning insulation, a heat pump, solar or a battery? Ask installers whether the work can be finished by 31 March 2027, while VAT is still 0%.
4. Landlords: check each property's EPC rating and expiry, and budget for higher tax on rental profits from April 2027.

For all current grants and loans in one place, see our UK energy grants update and the grants hub.

Sources

• HM Treasury: Budget 2026 document (28 October 2026)
• HMRC: Budget 2026: Overview of tax legislation and rates (28 October 2026)
• HM Treasury: Supporting documents for Budget 2026, including policy costings (28 October 2026)
• Prime Minister's Office, HM Treasury and DESNZ: Chancellor abolishes standing charges on gas bills to make payments fairer (28 October 2026)
• DESNZ and Ofgem: Energy debt circuit breaker: a strategy for domestic energy debt (28 October 2026)
• MHCLG: Your First Home (28 October 2026)
• HMRC: Find out if and when you need to use Making Tax Digital for Income Tax
• HM Treasury: High Value Council Tax Surcharge (28 October 2026)
• Ofgem: Energy price cap unit rates and standing charges (October to December 2026)
• DESNZ: Boiler Upgrade Scheme statistics: August 2026 (24 September 2026)
• DESNZ: Warm Homes Plan (January 2026)