Gas standing charges to be scrapped: what the Budget announcement means for your bill
Gas standing charges are set to be scrapped from 2027 at the earliest, with the cost moved onto unit rates. Most homes should pay a little less, but higher gas users could pay more.
Contents
- 1.What the Chancellor announced in the Budget
- 2.How removing gas standing charges affects your bill
- 3.Who gains and who pays more under the new system
- 4.What it means for prepayment, fixed tariffs, and heat pumps
- 5.Why electricity standing charges remain in place
- 6.Timeline and what you should do today
- 7.FAQs
What the Chancellor announced in the Budget
On the morning of 28 October 2026, ahead of his first Budget, Chancellor John Healey said he will ask energy regulator Ofgem to remove standing charges from household gas bills. A standing charge is the fixed daily fee you pay for your gas supply whatever you use, even in months when the heating is off.
The Treasury wants the change delivered "in 2027 or as soon as possible after". This is a policy announcement, not a rule that applies today: Ofgem still has to work out how it will be done. Most household gas tariffs in Great Britain currently include a daily standing charge, although some zero-standing-charge tariffs already exist.[1]
Under the Ofgem price cap for 1 October to 31 December 2026, the average gas standing charge is 29.68p a day, or about £108 a year. The change would affect around 23 million gas-connected homes in England, Scotland and Wales, and the Chancellor described gas standing charges as "unfair and outdated".
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How removing gas standing charges affects your bill
Removing the standing charge does not remove the costs it pays for. Those costs will be recovered through the gas unit rate instead: the price you pay for each kilowatt-hour (kWh) of gas you use.
In practice, your gas bill would move from a fixed daily charge plus a usage charge to a usage charge only. Having a gas connection would cost nothing in itself, but each unit of gas you burn for heating, hot water or cooking would cost more than it does today.
Ofgem has not said what the new unit rate will be. MoneySavingExpert estimates that, at today's prices, the typical gas unit rate would rise from 7.97p to about 9.11p per kWh, which is roughly the £108 spread across Ofgem's typical usage of 9,500 kWh a year. Martin Lewis has said he expects the rise to be just under 1p per kWh. The examples below use 9.11p for illustration only.
Here is how that would work out for two households at today's capped prices:
- A small home using 5,000 kWh of gas a year pays around £507 today (7.97p per kWh plus the £108 standing charge). At 9.11p per kWh with no standing charge, it would pay around £456, a saving of roughly £51 a year.
- A large home using 13,000 kWh of gas a year pays around £1,144 today. At 9.11p per kWh with no standing charge, it would pay around £1,184, roughly £40 more a year.
Because the fixed cost is shared out according to how much gas each home uses, rather than split equally between homes, lower users gain and higher users pay more. If the final rise turns out smaller than in this illustration, the break-even point moves higher (Martin Lewis has suggested it could be around 12,500 kWh a year), so more households would come out ahead.
Who gains and who pays more under the new system
The Treasury estimates that about 60% of account-holding households will be better off, saving an average of £45 a year, though estimates vary: Nesta has previously put the saving for a typical dual-fuel household at £27 a year. Which side of the line you fall on depends mainly on how much gas you use. The table uses the illustrative 9.11p rate and today's capped prices, so treat the figures as a guide rather than a forecast.
| Household profile | Annual gas use | Illustrative impact | Why |
|---|---|---|---|
| Gas hob only (electric heating) | About 1,000 kWh | Saves about £97 a year | Stops paying £108 a year for a connection used only for cooking. |
| Small flat or well-insulated home | About 5,000 kWh | Saves about £51 a year | Avoids the daily fee and burns relatively few units at the higher rate. |
| Typical home (Ofgem benchmark) | About 9,500 kWh | Roughly no change | The higher unit rate roughly cancels out the removed standing charge. |
| Larger or draughtier house | About 13,000 kWh | Pays about £40 more a year | The extra on every unit outweighs the £108 saved. |
| Very high use | About 16,000 kWh | Pays about £74 more a year | Heavy heating use means the unit-rate rise adds up quickly. |
Low gas users are the likeliest winners: small flats, well-insulated homes, households that use gas only for cooking, and homes that heat mainly with electricity or heat pumps but keep gas for hot water.
Larger families, older or poorly insulated homes and households where someone is at home all day are more likely to pay more. Martin Lewis has warned that some of those who lose out will be on lower incomes.
According to the Treasury, "targeted mitigation for a small number of households" will be set out in due course. It has not said who will qualify or what form the help will take, so it is not yet clear whether it will reach everyone who ends up paying more.
What it means for prepayment, fixed tariffs, and heat pumps
Removing gas standing charges creates distinct practical consequences depending on how you pay for your energy and how you heat your home.
Prepayment meter customers
Standing charges have long caused difficulty for prepayment customers. The daily charge keeps building up even in summer, when many homes use little or no gas, and is taken from the next top-up, leaving less credit for heating when winter arrives.
If the reform covers prepayment tariffs, removing the gas standing charge would stop new standing-charge debt building up during periods without gas use. Existing debt repayments and repayment of emergency or friendly credit could still reduce the amount of a top-up available to buy gas.[1]
Fixed-rate tariff customers
Whether the change will apply to fixed tariffs, trackers and other deals outside the price cap has not been confirmed. The announcement is mainly about the price cap, which sets standard variable tariffs. Martin Lewis expects a fix taken out now to keep its agreed rates, standing charge included, but that is his reading rather than a confirmed rule, and no transition rules have been published.
If a fixed deal is right for you and would save you money, there is no reason to put off fixing because of this announcement. It changes how bills are structured, not the underlying cost of energy. Check the detail again once Ofgem publishes its plans.
Heat pumps and electric heating
Moving the gas standing charge into the unit rate raises the price of each unit of gas, which narrows the gap between gas and electricity unit prices. That makes efficient electric heat pumps look better value to run by comparison.
It also helps households moving away from gas gradually. Today, keeping a gas connection just for a hob or as a back-up costs about £108 a year in standing charges alone. Without the daily fee, that connection would cost only what you use.
Why electricity standing charges remain in place
Some people have taken the news to mean all standing charges are ending. They are not: this announcement covers household gas bills only.
Under the Ofgem price cap for 1 October to 31 December 2026, the average electricity standing charge is 54.83p a day, or about £200 a year, nearly twice the gas charge. Together, the two add around £300 a year to a typical dual-fuel bill.
The government says it will set out further detail on reforming electricity standing charges next year. That is a plan to publish proposals, not a date for the charge to go, and Martin Lewis reports that the Chancellor described the electricity side as trickier. Dual-fuel households will keep paying a daily electricity charge for now.
Timeline and what you should do today
This announcement starts a regulatory process rather than changing your bill now. Ofgem will need to decide how the cost is moved onto unit rates, which tariffs and payment methods it applies to, and how high-use households are protected. MoneySavingExpert expects the change to arrive with a price cap update on 1 October 2027 or 1 January 2028.
Frequently asked questions
When will gas standing charges actually be removed from my bill?
The Treasury's target is "2027 or as soon as possible after". Ofgem has to design the change first, and MoneySavingExpert expects it to coincide with a price cap change on 1 October 2027 or 1 January 2028. Nothing changes on bills before then.
Will my overall energy bill go down as a result of this announcement?
For most people, slightly. The Treasury estimates about 60% of account-holding households will save, by an average of £45 a year. Because the cost moves onto the unit rate, lower gas users gain most and higher gas users are likely to pay more.
Are standing charges on electricity bills being scrapped as well?
No. The announcement covers gas only. The average electricity standing charge is about £200 a year under the current cap, and the government says it will set out further detail on reforming it next year.
What should I do if I am currently on a fixed energy tariff?
Nothing for now. Whether the change will apply to fixed tariffs has not been confirmed. Your current contract terms, including any standing charge, continue to apply, and there is no reason to delay fixing if a fix suits you.
Why are standing charges being shifted onto unit rates rather than deleted?
The costs a standing charge covers still have to be paid. Moving them onto the unit rate means each household pays in proportion to the gas it uses rather than the same fixed amount, which is why low users save and high users pay more.
Will there be help if my gas bill goes up?
The Treasury says "targeted mitigation for a small number of households" will be set out in due course. No detail on who would qualify, or how much help there would be, has been published yet.
Does this Budget announcement apply to households in Northern Ireland?
The announcement is for Great Britain (England, Scotland and Wales), where Ofgem regulates energy. Northern Ireland has its own regulator, the Utility Regulator, and the announcement does not say whether a similar change will happen there.
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Written by
Rob Gibbs
Hi, I'm Rob, and I run Energy-Review.co.uk. I initially started this project in 2018 when I was looking to switch energy suppliers and found there wasn't a website that provided simple, data-backed reviews on all the suppliers available. Since then, I have spent a lot of time (too much, some may say!) looking at all publicly available data about each supplier and writing reviews using this information. These reviews are updated as regularly as possible, and any data is backed up by a source where necessary. I have also started writing guides on various energy-related topics, which hopefully you will find useful. If you find any issues, please use our contact form to let us know.