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How to save on energy bills?

Written byKoyo Loans
First published17th October 2022
  • Introduction
  • How to save on energy bills?
  • How much should energy bills be?
  • How do energy bills work?
  • Is there VAT on energy bills?
  • What happens if I don’t pay my energy bills?
  • Why does insulating your house reduce energy bills?
  • How do solar panels reduce energy bills?
  • Can I get help with my energy bills?
  • How to read energy bills?

In 30 seconds…

To save money on your energy bills, you need to be mindful of your monthly energy consumption. The average UK household currently spends £95 per month on energy, but you can take certain steps to reduce this amount, like insulating your home and investing in solar energy. In addition to paying for the energy you consume, you are required to pay 5% VAT on energy bills in the UK. It’s really important to stay on top of your bill payments, as late and missed payments will result in penalties, and you may even have your energy supply cut off.


Energy bills are a significant drain on your monthly finances. What’s more, if you don’t pay your energy bills on time, you may receive a penalty or even have your energy supply cut off. Here, we look at why staying on top of your energy bills is important and offer some insight into how to save money on your monthly expenditure.

How to save on energy bills?

The easiest way to save money on energy bills is to be more mindful of your energy consumption. It’s estimated that the UK loses £9.5 billion per year on wasted energy, but there are lots of simple things you can do to save yourself some money.

For instance, turning off standby appliances, installing a smart thermometer, and turning down your thermostat are all simple ways of getting your energy bills under control. Changing the lightbulbs in your home and opting for LEDs can also save you significant amounts of money on your energy bills each year.

When it’s time to buy a new appliance, opt for one that is marked as energy-efficient and research how much money you’re likely to save by installing it. You should also consider washing your clothes at a lower temperature and reducing the amount of water you use on a daily basis. When combined, all of these small changes can help you save money on energy bills and get your consumption back under control.

How much should energy bills be?

Although every household is different, research shows that in the autumn of 2021, the average UK energy bill was £95 per month or £1,138 per year. However, energy bills have skyrocketed since the start of 2022, and the current average monthly energy bill is likely to be significantly higher than this.

While you can use this figure as a benchmark, there are so many things that can influence the cost of your energy bills. As well as the size of your home, you need to think about how well your property is insulated, how efficient your home appliances are, and how mindful you are about your general energy consumption.

The type of energy tariff that you’re on will also influence the cost of your bills, as Standard Variable Tariffs (SVTs) are usually more expensive than fixed tariffs, so it’s worth contacting your energy provider to check this. Ultimately, taking steps to reduce your consumption and being more mindful of the amount of energy you consume will help you reduce your monthly energy bills.

How do energy bills work?

Your energy provider charges you for the number of units of energy that you consume in a specific period. The unit of consumption for electricity is in kilowatt-hours (kWh), and it’s helpful to understand this metric so you can come to terms with how much energy you’re actually using.

As well as your consumption, your energy bills include wholesale costs, network costs, social and environmental obligations, other direct costs, supplier operating costs and margin, and taxes. Energy providers are regulated by Ofgem, meaning you can go to them if you have a complaint or issue with your energy provider.

Your energy bill will either be an estimate based on your previous consumption or the result of an accurate meter reading. It’s always better to supply accurate meter readings as estimates typically inflate your energy costs. Installing a smart meter at your home is an effective way of keeping on top of your bills and ensuring they’re based on your actual consumption.

Is there VAT on energy bills?

Currently, VAT on domestic fuel bills in the UK is charged at 5%. For business owners, VAT on energy bills is currently set at 20%. That being said, many businesses are entitled to a reduction in the VAT that they’re required to pay.

Just like many other consumables, electricity is subjected to Value Added Tax (VAT). You can find out how much VAT you’re paying on your energy bills by contacting your supplier directly or by checking your most recent bill. The VAT should be clearly expressed on your bill, making it easy for you to check your tax requirements.

As for businesses, the 20% VAT levied on energy bills isn’t applicable to charities or people who use their electricity for both business and domestic purposes. Businesses classed as low-energy users also qualify for reduced electricity rates, but you will need to contact your energy supplier directly to learn about your tax requirements.

What happens if I don’t pay my energy bills?

If you don’t pay your energy bills, your account will go into arrears. You will need to try and negotiate a repayment plan with your provider, and they may try and install a pre-paid meter at your home to help you get back on track.

The best thing to do if you’re struggling to meet your bills is to contact your energy provider directly to try and negotiate a more manageable payment schedule. If you don’t pay your bill within 28 days, refuse to have a pre-paid meter installed, and don’t come to a satisfactory repayment agreement, the energy provider can disconnect your power supply.

However, pensioners shouldn’t have their energy cut off between October and March, and people with severe financial difficulties will not be disconnected by Britain’s largest energy suppliers. So, if you’re struggling, get in touch with your energy provider. You can also look to apply for government benefits such as the Fuel Direct Scheme or the Winter Fuel Payment Scheme that you may be eligible for if you’re struggling with your energy bills.

Why does insulating your house reduce energy bills?

When installed correctly, insulation retains heat in your home and prevents it from escaping outside. Therefore, your home will be warmer, and you won’t need to spend as much money on heating your home throughout the colder months of the year.

To reduce your energy bills, you should insulate your walls, floors, and attic space. What’s more, because heat rises, insulating your roof is particularly important to keep warm air inside your home during the cold seasons. Proper insulation will also seal air leaks and insulate ducts, ensuring that the warm air inside your home doesn’t have any route of escape.

Although savings vary from property to property, correctly installed cavity wall insulation can save the average homeowner up to 15% on heating costs. So, while it might seem like a significant upfront expense, insulating your home correctly is an excellent way of saving money in the long run and will help you keep your energy bills under control.

How do solar panels reduce energy bills?

Installing solar panels reduces your dependency on the grid and is an environmentally-friendly way of accessing energy. Solar panels enable you to capture energy for the sun before using it to power your home. Aside from the cost of installation, solar energy is free, which provides significant savings when compared to the cost of powering your home from the grid.

In 2020, the government launched the smart export guarantee (SEG) scheme that enables homeowners to essentially sell unused electricity to the grid. So, not only can you save money on your energy bills by installing solar panels, you can actually earn money by supplying the grid with electricity. Although SEG tariffs vary considerably, you can earn up to £110 per year for any excess energy that you generate.

When you add this figure to the £400 that solar panels typically save homeowners each year, it’s not uncommon for you to save upwards of £500 per year on your energy bills when you install solar panels at home. So, if you have some savings and can afford to add them to your property, solar panels can be an excellent way of slashing your energy bills.

Can I get help with my energy bills?

If you’re struggling financially, you can get help with your energy bills. One way is to apply for a council tax rebate, which sees the council return up to £150 to help you cover your bills. This is available to people who have a home that is in council tax bands A to D.

The UK government also has several benefit schemes that you can apply for, depending on your financial circumstances. For instance, you might be eligible for the Warm Home Discount Scheme or the Winter Fuel Payment benefit. You can apply for both of these benefits online, and the government will take into consideration your personal finances before approving you for the benefit.

During the winter months, you can also apply for cold weather payments that become available when the weather drops below a specific temperature each year. Cold weather payments are only available to certain people who already received government support, but it’s worthwhile checking your eligibility if you’re struggling to meet your repayments.

How to read energy bills?

Your energy bills contain a lot of information, so making sense of them is far from straightforward. Thankfully, the energy regulator Ofgem stipulates what suppliers must include on energy bills, ensuring consistency from bill to bill.

You will find the name of your tariff, details of cheaper tariffs, how much energy you have used, contact details, and the relevant contact details of your supplier. The information expressed on your bill is designed to help you and make it easier for you to switch suppliers if you choose to do so.

If you have any questions about or issues with the information on your bill, you can contact Ofgem directly. Given that so many people struggle to make sense of the information that is listed on bills and other official documents, the fact that you can contact a regulatory body to assist you is good to know.

Key Takeaways

It’s impossible to understate the importance of your personal finances. They influence all aspects of your life, from the work that you do to the holidays that you take. Your financial situation dictates the lifestyle that you can lead now, as well as the life you hope to lead during your retirement. Therefore, it’s paramount that you develop a plan and stay in control of your personal finances.Tracking your personal finances is also imperative. Creating and maintaining a budget is the best way to do this, and tracking and recording your expenses along the way will illustrate how you’re doing. Given that there are so many aspects of your personal finances, developing a system to manage and monitor them couldn’t be more important.So, start with a budget and commit to tracking all aspects of your personal finances going forward. You will find that you’re more able to meet your personal and financial goals and less likely to fall into tough times. While it might seem daunting at first, once you develop a system, you will find it easy to manage and track your personal finances.

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