Autumn Budget 2025: energy bills cut from April 2026
Here’s the short version you can teach and use: from 1 April 2026, the average household bill will be about £150 lower a year because the government is moving some policy costs off bills and into general taxation. This was announced on 27 November 2025 in the Autumn Budget.
There’s extra help alongside this. The £150 Warm Home Discount is being extended to around 2.7 million more low‑income households, taking the total to up to 6 million homes eligible for the discount. If you qualify, this sits on top of the policy change above.
Quick guide to the acronyms you’ll see in headlines: ECO is the Energy Company Obligation; RO is the Renewables Obligation; Ofgem is the energy regulator. Under the Budget plans, ECO funding ends after 31 March 2026 and 75% of RO costs shift to general taxation, with savings appearing on bills from 1 April 2026.
Timeline you can pin to the classroom wall: 27 November 2025-Budget announcement; by 25 February 2026-Ofgem publishes the price cap for April to June 2026; 31 March 2026-ECO funding ends; 1 April 2026-changes show up on bills; and the effect continues for three years from then.
Remember what the price cap does and doesn’t do. Ofgem updates it every three months to limit the unit rates and standing charges on default tariffs. This Budget change lowers “policy costs” within that cap, but your final bill still depends on how much energy you use. Wholesale energy remains the biggest slice-around 40% of a typical bill-plus network costs and VAT.
If you’re on a fixed tariff, ministers expect suppliers to pass the saving on from April 2026 too. The policy changes are designed to keep affecting bills for the following three years, so it isn’t a one‑quarter dip and then done. Check your contract dates so you know when a new unit rate could kick in.
The headline £150 is a rounded figure. The government’s workings add up to an average £154 saving: about £88 from funding 75% of RO via taxation, £59 from ending ECO funding, plus roughly £7 from the VAT effect on those changes. That’s the arithmetic behind the announcement.
For a “typical” dual‑fuel household as Ofgem defines it-about 2.7 MWh of electricity and 11.5 MWh of gas a year-the impact is estimated at roughly £134 off the price cap level. That typical home uses less electricity than the all‑household average, which is why the saving is below the £154 average.
Different homes will see different numbers. A high‑demand rural household in a draughty property is estimated to save about £205 a year. A gas‑heated home that runs medical equipment and needs constant heating is put at roughly £224. A flat or one‑bed with 1–2 people might save around £88. An electricity‑only home using storage heaters, and no gas, could see the biggest change-about £442. These are annual estimates based on usage patterns.
What this means in practice: if your household uses more electricity than gas, the cut will feel larger because policy costs are more heavily loaded on electricity unit rates. If you use less energy overall, your saving will be smaller in pounds, even though the unit‑rate reduction is there. Your region and meter type still matter to your final bill.
No action is needed to get the unit‑rate reduction-it should flow through your tariff when it renews or adjusts from April 2026. If you think you qualify for the Warm Home Discount, check eligibility with your supplier. And if you’re struggling, tell your supplier early; Ofgem requires firms to help, and a new Debt Relief Scheme is planned for early 2026 for around 195,000 people on means‑tested benefits.
Media‑literacy tip for your students: “£150 off” is an average, not a promise for every bill. Watch for Ofgem’s February 2026 price‑cap announcement, keep an eye on your own usage, and read your tariff emails carefully so you know when the change lands on your account.