Energy Bill Calculator
Range: £500 - £3,000
£65.00
You save £65.00 per year
Net saving after adjustments: £42.00
VAT Breakdown
Annual Energy Bill
£1,300.00
VAT Rate
5%
VAT Amount
£65.00
Net Savings (Treasury)
£42.00
Long-term Impact with Inflation
Based on 3% annual inflation rate - shows how £42 annual savings compound over 10 years
Policy Trade-offs
Policy Impact
£850 million cost to government from VAT removal
Funded by cancelling the digital ID scheme
Digital ID Scheme
Original cost: £1.8 billion over 3 years
Savings: £1.8 billion (covers VAT cost + surplus)
Key Takeaway
The VAT removal is fully funded by scrapping the digital ID scheme, which would have cost taxpayers significantly more than the energy bill savings.
How VAT is Calculated
VAT (Value Added Tax) is a consumption tax applied to goods and services at a rate of 5% on energy bills.
Formula: VAT Amount = Annual Bill × 0.05
Example: £1,300 × 0.05 = £65 VAT removed
Why Only £42 Net?
The Treasury's net saving of £42 accounts for:
- Other energy cost adjustments
- Tax credit changes
- Inflation impacts on energy prices