Wednesday 26th February 2025

As the UK works its way through another chilly winter, the tax refund experts RIFT are taking a look at what changes in energy costs are likely to mean for British family finances this year.

The Energy Price Cap: what’s changing?

With well over 20 million UK households currently affected by the energy price cap, there’s a lot in the balance. As of the 1st of January 2025, the price of gas was limited to 6.34p per kilowatt hour, with electricity capped at 24.86p. Those figures set the yearly energy costs for a typical household at an estimated £1,738 for dual-fuel bills paid by Direct Debit.

On the 25th of February, however, Ofgem announced that the energy price cap would go up by 6.4% from the start of April—larger than the 5% bump that many had been predicting. As a result, the yearly fuel costs for a typical household will be going up by £111 to a total of £1,849.

What does it mean for you?

To put it in perspective, this means that typical bills for millions of families will now be £159 more expensive than they were in April 2024. It’s worth keeping in mind that it’s difficult to say what a ‘typical’ household really is. The energy price cap limits how much companies can charge per kilowatt hour, rather than how high the bills will actually be. The costs you end up facing will still depend on how much energy you use.

Looking back, looking ahead

This rise in the energy price cap is a reversal of recent downward trends in household fuel costs, which actually saw typical dual-energy bills dropping by as much as 7.2% in the 3rd quarter of 2024. That trend had seen many families paying over £400 less than they did in 2023—a drop of 20.6%. This meant that households were finally benefitting from more affordable energy bills after the prolonged cost of living crisis, with average bills of £1,568 equating to 4% of the average family income.

However, even then experts were already warning that this respite wasn’t set to last for long. Current estimates are now predicting a rise to over £1,800 per year by January 2026, with some suggesting costs closer to £1,900. While this figure is still lower than previous peaks seen in recent years, it’s a big leap in the cost of heating and running a typical UK home.