Ofgem officially raised the price cap to £1,723 effective October 2026.
Ofgem raises household energy cap to £1,723
Higher global gas prices wipe out the government's winter electricity tax relief for 22 million homes.
In a nutshell
British energy regulator Ofgem raised its default household energy price cap by roughly 4% to £1,723 a year starting October 1, 2026, adding about £60 annually to typical bills. The increase took effect even as the government reduced electricity value-added tax from 5% to 0% for the winter. Geopolitical tensions in the Middle East drove up international wholesale gas prices, overtaking the tax cut and leaving 22 million households exposed to higher heating and power expenses.
Highlights
- Ofgem set the fourth-quarter 2026 household energy price cap at £1,723 per year, up from £1,663.
- The roughly 4% increase adds £60 a year or £5 a month to typical dual-fuel direct debit bills.
- The UK government cut domestic electricity value-added tax from 5% to 0% through March 31, 2027.
- International wholesale gas spikes driven by Middle East tensions wiped out the tax savings.
- More than 22 million British households on standard variable tariffs face the higher rates starting October 1, 2026.
UK default energy price cap comparison
| Measure | Value |
|---|---|
| Previous annual default price cap | £1663 |
| New annual default price cap | £1723 |
| Annual bill increase | £60 |
| Monthly bill increase | £5 |
- The table shows the previous and new annual energy price caps for typical dual-fuel British households alongside the resulting annual and monthly bill increases.
- It defines the new maximum energy costs for over 22 million households ahead of potential further revisions in January 2027.
From the Editor’s Diary
Targeted domestic tax cuts cannot insulate consumer energy bills when raw wholesale fuel prices rise rapidly across global markets.
Who's involved
Ofgem
UK energy regulator setting default tariff price caps
goal → Enforce maximum unit rates and standing charges that suppliers can bill consumers
UK Government
British national administration directing fiscal and tax policy
goal → Lower household living costs through targeted tax reductions
Energy Suppliers
Retail energy providers across Great Britain including EDF and Sainsbury's Energy
goal → Comply with state price limits while covering wholesale fuel procurement costs
UK Domestic Consumers
Over 22 million households on standard variable default energy tariffs across Great Britain
goal → Limit winter heating expenses and secure affordable domestic energy
In short
TL;DR: British energy regulator Ofgem raised its household price cap to £1,723 a year starting October 1, 2026. Global gas market spikes outweighed a government tax cut on electricity.
Q: Why are UK energy bills rising despite a government tax cut?
- Ofgem lifted the annual default energy cap by roughly 4% to £1,723 from October 1, adding £60 a year to typical household bills.
How it unfolded
Ofgem sets higher winter default energy price limit
On August 26, 2026, UK energy regulator Ofgem officially announced the default tariff price cap rates for the fourth quarter of 2026, confirming the rise to £1,723 per year for average households.
Wholesale gas surge offsets domestic electricity tax cut
Following the announcement, energy suppliers, consumer groups, and market analysts detailed how the zero-rate VAT on electricity will automatically lower electricity rates but fails to offset higher international gas prices. Consumer advocates warned that wholesale pressures could push bills even higher going into the January 2027 review.
Where things stand
The £1,723 annual price cap is confirmed and takes effect on October 1, 2026, with the 0% electricity VAT automatically factored into customer bills through March 31, 2027. Market analysts and suppliers project that continued wholesale gas market volatility may lead to further cap increases in January 2027 unless international wholesale energy prices stabilize.