The Autumn Budget 2025 is out now: here's what it means for your energy bill
Rachel Reeves announced the Autumn Budget just a few hours ago. We know energy bills are one of the biggest strains on British households. We’ve been pushing for cuts in policy costs to bring bills down, so we’ve been watching the news closely.
Here’s what we know so far.
We’ll update this piece with more details as we get them.
The headlines:
- The Budget will remove around £134 of policy costs from the typical yearly energy bill, starting April 1st 2026 – but more changes (including potential network cost increases) are coming.
- EV drivers will face a new 3p per mile tax from April 2028.
- Grants for heat pumps are safe, and EV grants have been extended.
Does the 2025 Budget mean my energy bills go down next year?
Today's Budget means certain taxes and levies are shifting off energy bills or being scrapped altogether, reducing around £134 in policy costs from a typical yearly bill.
We think it’s great news, but it’s not as simple as saying your bills will definitely drop by £134 from April. While some policy costs are going down, others costs may well go up.
Next month, Ofgem will confirm changes on network costs and latest predictions suggest these will increase, along with increases to the Warm Home discount scheme. Wholesale prices continue to fluctuate – they may go up, or down – it's impossible to know for sure.
Long story short: the measures announced today mean your bill will be lower than it would’ve been without them. That’s great news.
But right now, there’s still a lot of uncertainty about what bills will really look like next year. We’ll have a clearer picture of the typical April bill in January.
When will these policy costs come off my bills?
We’ll pass the changes through to both our fixed and variable rates as soon as the policy cost changes come into effect, which will happen on April 1st 2026 according to the latest info.
What's changing on energy bills?
Energy bills cover a lot more than just the cost of generating and sending power to homes. There are various fixed costs charged to energy suppliers, like taxes and levies, and some of these have been scrapped or shifted in the new budget.
- The ECO scheme has been scrapped. This is a scheme to combat fuel poverty by making homes more energy-efficient through free or discounted insulation and other tech. It won't be renewed when it comes to an end in April 2026. More on this below.
- 75% of Renewable Obligations have been moved off electricity bills and onto general tax. This helped fund renewable generation projects between 2002-2017 to help the UK's transition to cleaner energy. It's an essential part of our energy future, but it's right to move these costs into tax to be paid for more fairly.
- A bit of money comes off VAT. VAT is always 5% of the bill. A lower bill means lower VAT, so there is a few pounds saving just from cutting bills.
Were there any other energy announcements?
ECO scheme and Warm Homes plan
An extra £1.5 billion will be added to the Warm Homes plan to boost support for low income households. The overall pot is now £14.7 billion and we'll be making the case for using this money to get the biggest bang for buck for those in fuel poverty.
We think it’s the right decision to scrap the ECO scheme. It had become too wasteful, adding high costs to everyone’s bills and only delivering meagre savings for the customers who used it. A reset through the Warm Homes plan is the right thing to do.
What if I was getting support through the ECO scheme? It's not being scrapped immediately: it'll come to an end in April 2026, so any works booked before then will go ahead.
Grants for EVs and heat pumps stay
The Boiler Upgrade Scheme will stay the same. This is a £7,500 grant to help households move to more sustainable heating like heat pumps.
The EV purchase grant is being extended and expanded. It will run for an additional 5 years to 2029/30. It’s the longest guaranteed commitment to EV purchasing support the UK has ever made. There are now 40 car models now eligible, four at the £3,750 grant and the rest at £1,500.
There's a new tax on electric vehicles
From April 2028, a new mileage-based charge on electric cars will be added, called the Pence-per-mile (“eVED”) tax. As a guide, an EV driver doing 8,300 miles per year will pay £249 per year.
In 2028-29, the charge will equal £0.03 per mile for battery electric cars (£0.015 per mile for plug-in hybrid cars), with the rate per mile increasing annually with inflation.
That still makes tax on an EV far cheaper than a petrol car. Including VED (£195) the total tax on an EV would be £444 vs around £795 for a petrol driver.
Overall
According to Octopus Energy CEO Greg Jackson:
"This cut in electricity bills is a positive step in the right direction for customers. Making electricity cheaper is also crucial for people adopting electric heating and electric vehicles.
The ECO scheme had become simply too wasteful, adding high costs to everyone’s bills and only delivering meagre savings for recipients. A reset through the Warm Homes Plan is the right approach.”
But there's more work to be done. It's crucial that Ofgem and the government keep other rising costs down, especially the cost of building and running the grid. Otherwise, we might be back to roughly where we are today.
Watch: Octopus CEO on Martin Lewis
The night before the Budget announcement, Greg Jackson answered your questions on The Martin Lewis Money Show Live. Catch the highlights here:
Published on 26th November 2025 by:
Hey I'm Constantine, welcome to Octopus Energy!
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