The Ofgem energy price cap goes up by 4% tomorrow, 1 October 2026, for a typical household using electricity and gas and paying by Direct Debit. The same day, VAT on domestic electricity falls to zero in Great Britain. For anyone running an air conditioner or an air-to-air heat pump this winter, the second change matters more than the first, because both of those run on electricity only.

Ofgem puts the typical annual bill at £1,723, up from £1,663, which is £60 a year or £5 a month. Its update says "the Government's decision to remove VAT from all domestic electricity bills is reflected in this update", so the 4% already includes the VAT cut. What it means for your own bill depends on how much of your usage is electricity.

What the price cap announcement says

Ofgem's price cap update covers 1 October to 31 December 2026. For Direct Debit customers on a default tariff, it says you will pay on average 26.32 pence per kilowatt hour for electricity, with a daily standing charge of 54.83 pence. Gas is 7.97 pence per kWh and 29.68 pence a day. Those are averages across England, Scotland and Wales, and your region will differ.

The electricity figure does not include VAT from 1 October 2026 to 31 March 2027. Gas still carries VAT at 5%. If you are on a fixed deal rather than the default tariff, the cap is not your price, so check your own rate. The government's announcement says it expects all suppliers to pass the VAT reduction on to all customers, including those on fixed tariffs.

Where the VAT cut comes from

The government announced the change on 21 July 2026. Its announcement says it will "remove VAT from domestic electricity bills from October 1", cutting the rate from 5% to 0%, and expects it to take around £45 off the yearly Ofgem price cap in October. HMRC's brief confirms the period: "The temporary zero rate applies from 1 October 2026 to 31 March 2027."

So this is temporary. It is a winter measure, and the next cap announcement is due on 25 November 2026 for January to March 2027. We would not plan a purchase around what happens after March.

What it means for AC and heat pump running costs

An air-to-air heat pump and a split air conditioner are the same kind of machine, and both are billed by the kWh of electricity they draw, not by the heat they deliver. A zero VAT rate takes the 5% off every one of those units until the end of March, which is the stretch when heating use is highest.

Here is a simple example, labelled as illustrative. It uses Ofgem's average default-tariff rate of 26.32 pence per kWh, and the power draws are our assumptions, not figures from Ofgem.

  • A unit drawing 0.8 kW for 8 hours uses 6.4 kWh, which comes to about £1.68.
  • A unit drawing 1.5 kW for 10 hours uses 15 kWh, which comes to about £3.95.

Real draw varies a lot with the outdoor temperature, the set point and the size of the room, and a unit typically draws far less once it has reached temperature. Standing charges are on top and do not change with use.

On cost per unit of heat, a heat pump delivering 3 kWh of heat for each kWh of electricity (an assumed seasonal figure) costs about 8.8 pence per kWh of heat at 26.32 pence. Gas at 7.97 pence through a boiler assumed to be 90% efficient comes to about 8.9 pence. On those assumptions they land roughly level, and an air-to-air system that performs better than that assumption comes out ahead. For the detail behind the figures, see what AC costs to run.

What to do now

  • Find your actual unit rate on your latest bill. If you are on a fixed deal, the Ofgem average is only a guide.
  • Check that your supplier shows 0% VAT on electricity from 1 October.
  • If you only use AC occasionally, get the filters cleaned before the first cold snap. A dirty filter makes the unit work harder for the same output.
  • Thinking about a new unit? Our piece on the Future Homes Standard explains where the rules on new-build heating are heading.

These are published numbers and clearly marked assumptions, not a quote for your property.