Government to “receive extra billions from soaring energy bills”

It is estimated that the increase in bills from October will generate an extra £2.6 billion for the government

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The government is expected to rake in billions through the VAT on energy bills when the new rise in the price cap will come.

A new report by The Energy Shop estimated that the Treasury is set to receive £2.6 billion from the rise of the cost of gas and electricity through the 5% VAT on bills.

The analysis suggests when Ofgem introduced its price in October to an average of £1,277, it would have generated around £1.64 billion annually in VAT.

In recent months, there have been calls for the tax to be scrapped amid the cost of living crisis.

Analysts note that last April when the price cap surged to £1,971 a year, it would have increased the amount taken from the tax to £2.53 billion.

An HM Treasury spokesperson said: “We understand that people are struggling with rising prices, which is why we are delivering a £37 billion support package which includes at least £1,200 of direct payments to protect the eight million most vulnerable families, this month’s National Insurance cut which will save the typical employee over £330 a year and the biggest ever cut to all fuel duty rates.”

“There has been no ‘VAT windfall’. In March the Office for Budget Responsibility forecasted lower VAT receipts for this year than they did in the autumn.”

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