In this section: Your bills
How much of my energy bill is tax?
Last updated . Figures refresh every night. How each figure is worked out.
Much less than on road fuel. Of a typical £1,663 annual dual-fuel bill, about £166 is tax and policy levies — 10% — made up of roughly £83 of VAT and £83 of policy costs that fund renewables support and schemes such as the Warm Home Discount. VAT on domestic gas is 5% and on electricity 0%, against 20% on most goods. The shares are Ofgem's own breakdown of the July to September 2026 price cap.
Figure as of 22 September 2026. Source: Ofgem.
Key figures
- £166Tax and levies on a typical £1,663 bill 10% of the bill, July to September 2026
- 0%VAT on household electricity Gas 5%; most goods 20%
- £83Policy levies on a typical bill About 5% of a bill, down from 15%
- £1,723Price cap, typical household a year from 1 October to 31 December 2026 down on a year earlier: −£32 (−1.8%) vs 1 October 2025
Sources: Ofgem, House of Commons Library.
What is the short version?
- Against petrol: tax is 10% of a typical energy bill, against 47.5% of the price of a litre of petrol.
- Moved, not removed: since April 2026 about £150 a year of levies is paid through general taxation instead of bills.
- Electricity costs 3.3 times as much as gas per unit, because most levies and the carbon cost of gas power land on electricity.
- Fastest-rising part: Networks went from £397 to £463 of the cap between the first and second quarters of 2026.
What is in a typical energy bill?
- Wholesale energy £698
- Networks £382
- Operating, debt and industry £366
- Policy costs tax £83
- VAT tax £83
- Supplier margin £42
- Not itemised £9
- Typical annual bill £1,663
Show as a table
| Part | Pounds a year |
|---|---|
| Wholesale energy | £698 |
| Networks | £382 |
| Operating, debt and industry | £366 |
| Policy costs (tax) | £83 |
| VAT (tax) | £83 |
| Supplier margin | £42 |
| Not itemised | £9 |
| Total: Typical annual bill | £1,663 |
Figure as of 22 September 2026. Source: Ofgem.
Shares of the July-September 2026 cap. Pound figures are those shares applied to the total and rounded. In the October cap wholesale rises to about 47% and electricity VAT drops to zero.
How much VAT is on gas and electricity?
Domestic energy has carried reduced-rate VAT of 5% since the 1990s, against 20% on most goods. VAT on domestic electricity is zero from 1 October 2026 to 31 March 2027; gas stays at 5%.
Figure as of 22 September 2026. Source: Ofgem. Checked by hand 22 September 2026.
Figure as of 22 September 2026. Source: Ofgem. Checked by hand 22 September 2026.
Figure as of 22 September 2026. Source: Ofgem. Checked by hand 22 September 2026.
Figure as of 22 September 2026. Source: Ofgem. Checked by hand 22 September 2026.
What are the policy levies on my bill?
For years, government schemes were paid for through bills rather than general taxation: support for renewable generators (the Renewables Obligation, Feed-in Tariffs and Contracts for Difference), the Energy Company Obligation insulation scheme, and the Warm Home Discount. Because a levy on a bill takes the same amount whether you are rich or poor, critics called them regressive.
From April 2026 the Energy Company Obligation stopped being charged on bills, and 75% of the Renewables Obligation cost moved to the Treasury — together worth about £150 a year to a typical household. The cost has not disappeared: taxpayers now fund it instead of bill payers. Policy costs are now about 5% of a typical bill, down from around 15%.
What renewables support costs you sets out the three schemes and what each adds to a household bill.
Why does electricity cost so much more than gas per unit?
Electricity is 26.32p a kWh against 7.97p for gas — about 3.3 times as much. Two reasons. Most historic levies were loaded onto electricity rather than gas. And the wholesale electricity price is usually set by the last gas power station needed to meet demand, so electricity inherits the gas price plus the cost of carbon. Gas generators pay for their emissions through the UK Emissions Trading Scheme plus a UK-only top-up, and that cost is built into the wholesale electricity price everyone pays.
Why UK electricity is so expensive goes into this in full.
Which part of the bill is rising fastest?
With levies falling, the part now growing fastest is networks: grid expansion to connect new generation, and payments to wind farms to switch off when the grid cannot carry their power. Networks went from £397 to £463 of the cap between the first and second quarters of 2026.
What does every part of the bill pay for?
| Part of the bill | What it pays for | Per year |
|---|---|---|
Wholesale energyDetails for Wholesale energy | The gas and electricity your supplier buys | £698 |
| ||
NetworksDetails for Networks | Pipes, cables, pylons, the grid operator keeping supply and demand balanced, and grid upgrades | £382 |
| ||
Operating, debt and industryDetails for Operating, debt and industry | Billing, smart meters, bad debt, costs of failed suppliers | £366 |
| ||
Policy costsDetails for Policy costs | Levies funding renewables support, the Warm Home Discount and similar schemes | £83 |
| ||
VATDetails for VAT | 5% on the total (gas and, until October, electricity) | £83 |
| ||
Supplier marginDetails for Supplier margin | Capped earnings allowance | £42 |
| ||
Not itemisedDetails for Not itemised | The part of the bill Ofgem’s rounded percentage shares leave out. | £9 |
| ||
Common questions
- How much of a UK energy bill is tax?
- About £166 of a typical £1,663 annual dual-fuel bill, or 10%: £83 VAT and £83 policy levies.
- What is the VAT rate on energy bills?
- 5% on domestic gas and 0% on domestic electricity. VAT on domestic electricity is zero from 1 October 2026 to 31 March 2027; gas stays at 5%.
- What are green levies costing me?
- Policy costs are about £83 a year on a typical bill, roughly 5% of it, down from around 15% before the Energy Company Obligation and most of the Renewables Obligation moved to general taxation.
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The figures belong to the bodies that published them and are used under their terms, listed in Sources for this page; most are Crown copyright under the Open Government Licence. Only our own words, analysis, charts and derived calculations are ours, published under CC BY 4.0: reuse them, including commercially, if you credit Tekstak Ltd and link back to this page.
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- EU average household electricity price, semi-annual (CSV) JSON Eurostat: CC BY 4.0 (Eurostat)
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Sources for this page
| Source | Publisher | Figures as of | Updated | Licence |
|---|---|---|---|---|
| Ofgem, energy price cap unit rates and standing charges | Ofgem | 22 September 2026 | quarterly | Open Government Licence v3.0 |
| Electricity prices for household consumers (nrg_pc_204) | Eurostat | 1 July 2025 | semiannual | CC BY 4.0 (Eurostat) |
| House of Commons Library, what makes up an electricity bill (May 2026) | House of Commons Library | 22 September 2026 | annual | Open Parliament Licence v3.0 |
Each source's figures are used under the licence shown. Our own words, analysis, charts and derived calculations are ours, under CC BY 4.0.