Bigger energy bill help planned in Budget as price cap set to rise

What happened

According to The Guardian, Chancellor John Healey is preparing to spend more than £1bn in this month's Budget to help households cope with rising energy bills, with most of that money likely to go towards a bigger discount for people on certain benefits. The move comes after officials became alarmed at forecasts showing the energy price cap could rise by as much as £442 in January, which would wipe out the benefit of the VAT cut on electricity that was announced earlier this year.

The paper reports that Healey is considering increasing the Warm Home Discount — currently £150 for eligible households — by a further £100, funded by taxpayers rather than added to everyone else's bills. He is said to be resisting a push from Energy Secretary Miatta Fahnbulleh to go further and strip all levies off bills altogether, a move that would have cut costs for every household by up to £120 but cost the Treasury as much as £3.2bn.

Separately, The Guardian reports that energy officials are working on more structural changes for after the Budget, including a possible "social tariff" that would charge poorer households less per unit of electricity, or a "rising block tariff" that would give every household a cheaper allowance of essential energy before prices rise. As one commentator put it to the paper, "a serious price spike is coming" unless action is taken. No final decisions have been made, and the Treasury says tax and spending decisions will be set out at the Budget itself rather than confirmed in advance.

What it means for your bills — and for upgrades

None of this changes the bigger picture for homeowners: the cheapest unit of energy is still the one you don't use. If the price cap does rise by hundreds of pounds in January as forecast, the payback period on insulation, heating upgrades and solar shortens, because every kWh saved is worth more.

A few things already in place are worth knowing about if you're planning work this winter:

• 0% VAT on energy-saving materials. Heat pumps, insulation and solar panels (including batteries) are installed at 0% VAT until 31 March 2027, so our figures below already reflect that where it applies.
• Boiler Upgrade Scheme. In England and Wales, £7,500 is available towards an air or ground source heat pump through an MCS-certified installer. In Scotland, the Home Energy Scotland grant offers up to £7,500, plus an optional £7,500 interest-free loan.
• Warm Homes Plan. Published in January 2026, this is a £15bn programme running to 2030, including grants for low-income households and loans — some interest-free, some low-interest — that are being phased in. Details of eligibility are still emerging, so treat it as a scheme to watch rather than one to budget around yet.

Heat pumps

With the Boiler Upgrade Scheme grant and 0% VAT both applying, an air source heat pump is one of the more sheltered upgrades right now. A typical 8 kW installation costs £12,900, within a £10,100 – £16,800 range before any grant — see Air source heat pump for the full breakdown by size and property type.

Insulation

External wall insulation is the other big lever against rising bills, also zero-rated for VAT until March 2027. A typical job on a 150 m² house runs £26,000, with the range depending mainly on thickness and insulation type — External wall insulation has the options compared side by side.

Solar and batteries

If a social tariff or rising block tariff does eventually arrive, households that generate and store their own power will be the most insulated from it either way. A 6 kWp solar PV system typically costs £12,600, and adding a battery changes the maths on how much of that generation you can use in the evening —

Material	Typical	Usual range	Lifespan
No battery	£9,500	£7,450 – £12,400	–
5 kWh battery	£12,600	£9,800 – £16,300	–
10 kWh battery	£15,600	£12,200 – £20,300	–
13.5 kWh battery	£17,800	£13,800 – £23,100	–

sets out the battery options and their typical cost.

Boilers staying on gas

Not every home is ready for a heat pump, and that's fine — a straightforward combi boiler replacement typically costs £2,800. Gas boiler work must be carried out by a Gas Safe registered engineer; see New boiler for what drives the price up or down.

Our take

We build these figures from labour hours × local trade rates plus materials, then check them against market prices and real quotes — not from any of the grant or tariff numbers discussed in the Budget, which remain unconfirmed until announced. If you're getting quotes for any of this work now, it's worth running them through our "is my quote fair" tool before you commit, especially while demand for heat pumps and insulation is likely to rise alongside bills.

We'll update this page once the Budget confirms what's actually changing for the Warm Home Discount and any wider tariff reform.