Energy: VAT

(asked on 18th February 2022) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what estimate his Department has made of the potential increase in the tax take through VAT on household energy bills will be by October 2022.


Answered by
Lucy Frazer Portrait
Lucy Frazer
Secretary of State for Culture, Media and Sport
This question was answered on 28th February 2022
The Government is providing significant financial support of up to £350 to the majority of households, which will cover more than half of the forecast £700 rise in energy bills for the average household. This support is worth £9.1 billion in 2022-23 and is more generous than a VAT cut. All taxes are kept under review, but there are no plans to remove VAT on domestic fuel and power.

High energy prices reduce VAT revenues. In recognition that families should not have to bear all the VAT costs they incur to meet their needs, domestic fuels such as gas and electricity are already subject to the reduced rate of 5 per cent of VAT. If people spend more on energy where VAT is 5 per cent, they spend less on goods and services that on average have a much higher VAT rate, thereby reducing VAT revenue overall.

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