The October 2026 price cap quietly made heat pumps cheaper

Published 14 September 2026. Figures verified 14 September 2026 against Ofgem’s published rates for 1 October 2026 to 31 December 2026.

The headline on 1 October 2026 is that energy bills go up 4%, to £1723 a year for a typical household. That is the number every outlet will run, and it is true.

It is also the least interesting thing about this cap change. The 4% is an average of two very different movements, and the gap between them shifts the economics of home heating more than any single quarter has in years.

Gas went up. Electricity essentially didn’t.

Gas rose 9%. Electricity rose 1% — and its standing charge actually fell. Ofgem attributes the underlying rise to wholesale gas costs, up 11% over three months.

Electricity stayed flat for a different reason, and it is the part worth understanding.

VAT came off electricity — for six months

The government removed VAT from domestic electricity bills for the winter. Ofgem’s own figure is that without it, the typical electricity bill would have been about £45 a year higher. So the flat electricity rate isn’t the market being kind — it’s a tax cut absorbing a rise that would otherwise have shown up on your bill.

Two consequences follow, and they point in opposite directions. For this winter, electricity is unusually cheap relative to gas. From April 2027, if the measure lapses, that reverses overnight and electricity takes a roughly 5% step up on top of whatever the cap does.

What it does to the heat pump maths

Heating comparisons come down to pence per kWh of useful heat: the gas rate divided by boiler efficiency, against the electricity rate divided by the heat pump’s SCOP. We work through why in the main heat pump vs gas guide. Run it either side of 1 October, for a 90% efficient boiler and a heat pump at SCOP 3.5:

The advantage nearly doubles, from 8% to 15%. But the number that actually matters is the last row.

The break-even SCOP falls from 3.21 to 2.97. That is the efficiency a heat pump needs just to draw level with a gas boiler. Before October, you needed a genuinely good install to get there — 3.21 is above what a mediocre installation achieves. From October, the bar sits below 3.0, which most competent installations clear comfortably. Against a more realistic 85% efficient boiler it drops to about 2.81.

Nothing about the technology changed. The threshold moved.

In actual money

Ofgem revised its typical consumption benchmarks on 1 July 2026 — medium gas use fell from 11,500 to 9,500 kWh a year, reflecting more efficient homes and milder weather. Using the current benchmark, and counting the gas standing charge as a saving only because the supply goes entirely:

The gap widens by roughly £58 a year, or about 35%. On a fifteen-year horizon that is not nothing, though it still does not on its own justify the upfront cost — the main guide is honest about that, and about the homes where gas remains the better answer.

What we would not conclude from this

Three cautions, because a quarter is a short time to reason from.

• Six months is not a trend. Half of this move is a temporary tax cut with a legislated end date. Model your decision on rates with VAT back on electricity, and treat this winter as a bonus rather than the baseline.
• A bad install is still a bad install. The break-even SCOP fell, but a heat pump running 55°C flow into undersized radiators will sit near 2.5 and still lose to gas. The threshold moved; the requirement to clear it did not disappear.
• This is a running-cost story only. It changes nothing about the upfront gap, which the £7,500 grant narrows but rarely closes.

Common questions

What happens to energy prices on 1 October 2026?

The Ofgem price cap rises 4% to £1723 a year for a typical direct debit household. The rise is almost entirely gas: the gas unit rate goes from 7.33p to 7.97p per kWh, up 9%, while electricity moves from 26.11p to 26.32p, up just 1%.

Why is VAT being removed from electricity bills?

The government has temporarily zero-rated VAT on domestic electricity in Great Britain from 1 October 2026 to 31 March 2027, as a six-month measure to hold winter bills down. Without it, Ofgem says the typical electricity bill would have been around £45 a year higher. Gas keeps its 5% VAT, and Northern Ireland is excluded from the measure.

Does the October 2026 cap change make heat pumps cheaper than gas?

Relatively, yes. Because gas rises 9% and electricity barely moves, a heat pump at SCOP 3.5 goes from about 8% cheaper per unit of heat than a 90% efficient gas boiler to about 15% cheaper. The break-even SCOP — the efficiency a heat pump needs just to match gas — falls from 3.21 to 2.97.

Will electricity get more expensive again in April 2027?

The VAT zero rate is legislated to end on 31 March 2027. Unless it is extended, 5% VAT returns to domestic electricity in Great Britain from 1 April 2027, which would add roughly 5% to the electricity unit rate on top of whatever Ofgem does to the cap itself. Anyone modelling heat pump running costs beyond this winter should assume the zero rate goes away.

Run it for your own home

These are national averages at a benchmark consumption. Your usage, your region and your install are not the benchmark. The heat pump calculator runs the same arithmetic on your figures, including a toggle for removing the gas supply entirely, and shows every assumption as it goes.

Rates are Ofgem’s published price cap figures for direct debit customers, national average, verified 14 September 2026. The VAT position is from HMRC’s guidance on the temporary zero rate. Consumption benchmarks are Ofgem’s TDCV values as revised on 1 July 2026. Every figure on this page is calculated from those sources at render time rather than typed in. Spotted an error? Email hello@energycosting.co.uk.