From October 1, a typical household’s energy bill will be limited to £2,500 for two years.
This is in addition to the previously announced cost of living support program. What help can you get?
Who is getting the cost-of-living payments and when?
Two payments totalling £650 are being made to over 8 million low-income households who receive the following benefits.
Universal Credit
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Income Support
Working Tax Credit
Child Tax Credit
Pension Credit
The first instalment of £326 was paid to around 7 million of these people between 14 and 31 July. The money is automatically paid into a bank account – usually marked ‘DWP cost of living’.
The 1.1 million people who received only tax credits, rather than any other benefits, had to wait longer.
Their first payment is also automatic and was due to be made directly to their bank account by HM Revenue & Customs (HMRC) between 2 and 7 September. This is identified in a different way, using the letters CL and their National Insurance number.
All 8 million people will receive their second instalment of £324 later this year. The first group will receive the money in the autumn and the smaller group will receive 1.1 million in the winter. No exact dates have been confirmed.
If people receive New Style Employment and Support Allowance, Contributory Employment and Support Allowance or New Style Jobseeker’s Allowance, they are not eligible for these benefits – unless they receive Universal Credit.
Anyone who thinks they are entitled to help but have not received it by mid-September should contact the office that pays benefits or tax credits for them.
Those who may have missed out include the 850,000 pensioner households that the government has said do not claim pension credit, which is the way to get these extra payments.
Additional eligibility details are outlined here for those in England, Wales and Scotland, and for those in Northern Ireland.
What about the payment for disabled people?
From 20 September, up to 6 million people receiving the following disability benefits will receive £150 – possibly in addition to the £650 payment.
Disability Living Allowance
Personal Independence Payment
Attendance Allowance
Scottish Disability Allowance
Armed Forces Independence Payment
Continuous Attendance Allowance
War Pension Liquidity Supplement
None of these cost-of-living payments affect the taxes you pay, or the benefits or tax credits you receive.
How will the £400 energy discount be paid?
All UK households will receive a grant that will reduce their energy bills by £400 from October.
In other words, everyone’s energy bill will be reduced by £400 from October. This will be applied over a six-month period, with reductions of £66 in October and November and £67 per month between December 2023 and March 2023.
The discount will be provided automatically by energy suppliers in England, Scotland and Wales. There is no need to apply.
Direct debit and credit customers will have the money added to their account. Customers with prepayment meters will have that amount applied to their meter or receive a voucher.
Separate arrangements are being made for Northern Ireland households with their own energy markets, but details have not yet been finalised.
What extra help will pensioners get for winter fuel bills?
Households that receive a winter fuel allowance – worth between £200 and £300 for almost all households with at least one person of retirement age – will receive an extra £300 in November or December.
This should cover almost all pensioners in the UK.
Low-income pensioners claiming Pension Credit will receive this money in addition to the £650 of support for benefit recipients mentioned above.
This means that when all the payments and discounts are added together, a small group of disabled pensioners will receive a total of £1,500.
What payments have already been made?
Around 80% of households already receive a £150 energy rebate, usually through their council tax bill.
The method of payment depends on whether you pay your council tax by direct debit and where you live in the UK.
Some people have received fuel vouchers through the Family Support Fund distributed by their local council.
Councils have until September to make payments, but research by the BBC found that more than three million households in the UK are still waiting for 1 July, including many on low incomes.
How is the extra support being funded?
The government has not said how much the new energy price guarantee scheme will cost. However, industry analysis suggests it could cost between £130 billion and £150 billion.
The money to cover the costs will be borrowed by the government, the
The previously announced support package is being funded through a windfall profits tax (officially known as a provisional tax) levied on energy companies (not your domestic suppliers). It is expected to raise about £5 billion next year.
Companies extracting oil and gas are making much more money than they did last year.
Companies that generate electricity in the future could also be taxed.
The tax will cover part of the government bill, but not all of it.
Will the cost of living keep going up?
Prices are already rising at a faster rate than at any time in the last 40 years.
Official forecasters say the pace will accelerate. Prices are not expected to fall next year, but the rate of increase is expected to slow.
Households now have two years of certainty, but businesses have only six months.
The long-term outlook depends in large part on the war in Ukraine and its broader impact on Russian energy supplies.