UK Prime Minister Andy Burnham Announces VAT Cut on Electricity and Tax Allowance Review
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New Prime Minister Andy Burnham said VAT on domestic electricity will be reduced to zero from October and that he will examine raising the personal tax-free allowance, while acknowledging fiscal challenges.
Prime Minister Andy Burnham announced that the value-added tax on household electricity will be eliminated from 1 October, a measure the government says will save an average family about £45 a year. The cut, which reduces the rate from 5 percent to zero, is intended to ease energy costs, though wholesale gas prices remain the main driver of bills.
Burnham also said he will "look at" raising the personal allowance that determines how much income is earned before income tax and National Insurance apply. He noted that altering the allowance would be difficult given the current economic environment, where thresholds have been frozen until 2031.
The proposals come as the new administration faces broader pressure to address living-cost issues, including transport fares, housing affordability and social care funding. Chancellor John Healey is expected to outline financing plans in the upcoming autumn budget.
Analysts caution that any reduction in tax revenue would need to be offset by spending cuts or borrowing, and that the VAT cut alone will have a modest impact on overall household expenses.