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How the energy price cap works: what £1,723 a year really means

Written by James Whitfield · Updated 28 October 2026 · 6 min read · Checked against 2026/27 DWP & HMRC rates

Contents (6 sections)

Quick answer: the energy price cap
What the cap limits
Who it covers
How often it changes
VAT
Northern Ireland

Quick answer: the energy price cap

Ofgem: “This is the maximum amount your supplier can charge for a unit of energy and standing charge together.”²
“It does not limit the cost of your total bill. The more energy you use, the higher your bill will be.”²
“From 1 October to 31 December 2026, the price cap will be £1,723 per year.” That is for a typical household “if this level was sustained for a year”, not a limit on your bill.¹³
It covers standard variable (default) tariffs in England, Scotland and Wales. It does not cover fixed tariffs.²
Last checked: 28 October 2026.

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What the cap limits

The cap sets a maximum unit rate (the price per kWh) and a maximum daily standing charge. You pay for what you use, so a bigger home or more heating means a bigger bill.²

From 1 October to 31 December 2026, the averages for people paying by Direct Debit are 26.32p per kWh for electricity with a 54.83p daily standing charge, and 7.97p per kWh for gas with a 29.68p daily standing charge.¹

“This figure is based on the average energy unit rate and standing charge for people who pay by Direct Debit in England, Scotland and Wales.”¹ Your own rates depend on your region and how you pay.

Price cap rates for your region →

Who it covers

Ofgem: “These are called standard variable tariffs.” You are covered on a default tariff whether you pay by standard credit, Direct Debit, prepayment or an Economy 7 meter.²⁴

You are not protected by the cap if you have agreed a fixed tariff, have a business energy contract, get your heat from a heat network or use heating oil.²

Fixed or variable tariff? →

How often it changes

Ofgem: “We set the price cap level every 3 months.” The cap for 1 January to 31 March 2027 will be announced by 25 November 2026, then by 23 February 2027 for April to June. “We may publish before these dates if we need to because of external reasons.”²⁴

VAT

HMRC: “The temporary zero rate applies from 1 October 2026 to 30 June 2027.” The Budget on 28 October 2026 extended it from 31 March (announced; the legislation is due in early 2027). Gas stays at 5% VAT.⁵ The cap rates already include this.

“In Northern Ireland, qualifying supplies of electricity remain liable to VAT at the reduced rate of 5%.”⁵

Northern Ireland

Northern Ireland is not covered by Ofgem's cap. The Utility Regulator says: “We scrutinise and approve the maximum tariffs that Power NI can charge its customers”.⁶

Frequently asked questions

Does the price cap limit my energy bill?

No. It limits the unit rate and standing charge. The more energy you use, the higher your bill.

Will I pay £1,723 this year?

Not necessarily. £1,723 is Ofgem's figure for a typical household paying by Direct Debit if the level lasted a year. Your bill depends on how much you use and your rates.

Am I covered on a fixed tariff?

No. Fixed tariffs are not covered by the cap.

Does the cap apply in Northern Ireland?

No. Northern Ireland's tariffs are regulated by the Utility Regulator.

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Sources & references

The figures and rules in this guide are drawn from the official UK government sources below. Rates are the confirmed 2026/27 amounts. Each link opens the relevant official page in a new tab.

Verified against published UK government guidance.

Independent guide only. Written using published 2026/27 DWP and HMRC figures. Not an official government service. For case-specific guidance, contact Citizens Advice or a welfare-rights adviser. Methodology · Editorial standards