HM Government says the Autumn Budget 2025 will take around £150 off household energy bills from April 2026 by moving a chunk of policy costs into general taxation, alongside expanding the Warm Home Discount to up to six million households. For bill‑payers, the effect is a lower unit rate rather than a one‑off payment.

Two schemes drive the change: the Energy Company Obligation will stop being funded from bills after 31 March 2026, and 75% of the Renewables Obligation will be paid from general taxation. The saving starts on 1 April 2026 and, according to the Treasury, will flow through for three years.

Ofgem updates the default tariff price cap every quarter. The cap for April–June 2026 will be set in February 2026, so the final numbers will depend on wholesale markets at that point. Ministers are clear the intervention trims policy costs on the bill; it does not shield households from swings in wholesale energy, which still accounts for roughly 40% of what people pay.

That headline £150 is a rounded £154 average per household. On the government’s arithmetic, funding three‑quarters of the Renewables Obligation from tax delivers about £88 of the average saving, ending ECO on bills adds £59, and lower VAT on the reduced unit rates contributes around £7.

For a ‘typical’ dual‑fuel home as defined by Ofgem - 2.7 MWh of electricity and 11.5 MWh of gas a year - the impact is equivalent to roughly £134 off the price cap. The gap between £154 and £134 reflects that typical households use less electricity than the all‑household average, and the Renewables Obligation change mainly affects electricity unit rates.

The reduction arrives via lower per‑unit charges. Current policy costs in the cap translate to around £24.80 per MWh off the electricity unit rate from the RO change, plus £8.91 per MWh off electricity and £3.15 per MWh off gas from ECO coming off bills. Heavy electricity users therefore see larger absolute savings.

Real‑world examples help. A high‑demand rural home with poor insulation could see around £205 a year off. A gas‑heated property with medical equipment and constant heating might save roughly £224. A low‑use flat may be closer to £88, while an electric storage‑heated home using about 12.5 MWh of electricity and no gas could see a saving near £442, all else equal.

What if you’re on a fixed tariff? The government expects suppliers to pass the reductions through from April 2026. In practice, that means fixed‑deal unit rates contracted today may still be adjusted when policy costs drop, but the timing and mechanism will sit in the small print. Check how your supplier treats regulated cost changes and whether exit fees apply.

It’s worth separating policy costs from the rest of the bill. Network charges linked to upgrading and running the system still need to be paid and will remain on bills. Wholesale costs - set in global markets - are the single biggest swing factor and can easily outweigh policy reductions over a quarter.

Who ultimately pays shifts rather than disappears. Moving RO and ECO off bills and onto general taxation reduces the energy line in household budgets but increases what the Exchequer covers. For inflation watchers, lower policy costs on bills could nudge future energy price cap levels down versus the counterfactual, though the wholesale path will dominate.

Separate to the levy‑to‑tax shift, the Warm Home Discount is being extended. The £150 support will reach around 2.7 million more of the poorest households, taking the total to as many as six million. That assistance sits alongside the unit‑rate changes and will matter most for low‑income, high‑need homes.

Key dates are set. ECO funding on bills ends on 31 March 2026, the savings start on 1 April 2026, Ofgem confirms the April–June 2026 cap in February 2026, and the changes are planned to influence bills for three years. Households should budget for lower policy costs from April 2026, but keep an eye on wholesale price moves and supplier communications.