Energy bills for a typical household are to be limited to £2,500 for two years, from 1 October.
This is in addition to a previously announced cost-of-living support package. What help can you get?
Who is getting the cost-of-living payments and when?
Two payments totalling £650 are being made to more than eight million low-income households who receive the following benefits:
- Universal Credit
- income-based Jobseekers Allowance
- income-related Employment and Support Allowance
- Income Support
- working tax credit
- child tax credit
- pension credit
The first instalment of £326 was paid to about seven million of these people between 14 and 31 July. The payments were made automatically into bank accounts – usually marked “DWP Cost of Living”.
The 1.1 million people who only receive tax credits, rather than any of the other benefits, have had to wait longer.
Their first payment is also automatic, and was due to be paid straight into bank accounts by HM Revenue and Customs (HMRC) between 2 and 7 September. This is identified differently, with the letters CL and their National Insurance number.
All eight million will receive their second instalment of £324 later in the year. The first group will receive the money in the autumn, and the smaller group of 1.1 million in the winter. No exact dates have yet been confirmed.
People are not eligible for these payments if they receive New Style Employment and Support Allowance, contributory Employment and Support Allowance, or New Style Jobseeker’s Allowance – unless they get Universal Credit.
Anyone who thinks they are entitled to the help, but has not received it by the middle of September, should contact the office that pays their benefit or tax credits.
Those who could miss out include the 850,000 pensioner households which the government says do not claim Pension Credit, which is a gateway to these extra payments.
What about the payment for disabled people?
- Disability Living Allowance
- Personal Independence Payment
- Attendance Allowance
- Scottish Disability Payments
- Armed Forces Independence Payment
- Constant Attendance Allowance
- War Pension Mobility Supplement
None of these cost-of-living payments affect the tax you pay, or the benefits or tax credits you receive.
How will the £400 energy discount be paid?
All UK households will get a grant which will reduce energy bills by £400 from October.
In other words, from October, everyone’s energy bill will be cut by £400. This will be applied over six months, with a reduction of £66 in October and November, and £67 every month between December and March 2023.
The discount will be made automatically by energy suppliers in England, Scotland and Wales. There is no need to apply.
Direct debit and credit customers will have the money added to their account. Customers with pre-payment meters will have the amount applied to their meter, or receive a voucher.
What extra help will pensioners get for winter fuel bills?
Households that receive the Winter Fuel Payment – which is worth £200-£300 and is paid to nearly all homes with at least one person of pension age – will receive an extra £300 in November or December.
That should cover nearly all pensioners across the UK.
Lower-income pensioners who claim pension credit, will receive the money in addition to the £650 support for those on benefits which is mentioned above.
This means a small group of pensioners with disabilities will receive a total of £1,500 when all the payments and discounts are combined.
What payments have already been made?
About 80% of households are already receiving a £150 energy rebate, often through their council tax bill.
How it is paid depends whether you pay your council tax by direct debit and where you live in the UK.
Some people were given fuel vouchers through the Household Support Fund which is distributed by local councils.
How is the extra support being funded?
The government is not saying how much the new energy price guarantee plan will cost. However, industry analysis has suggested it could cost between £130bn and £150bn.
The money to cover the cost will be borrowed by the government,
Companies which extract oil and gas are making much more money than they were last year.
Firms which generate electricity may also be taxed more in the future.
The levy will cover some, but not all, of the bill for the government.
Will the cost of living keep going up?
Prices are already rising at a faster rate than at any time in the last 40 years.
Official forecasters say that the rate is set to accelerate. Prices are not expected to fall next year, but the rate of increase is expected to slow.
There is now two years of certainty for households, but only for six months for business.
The long-term outlook depends to a great extent on the war in Ukraine, and its wider impact on energy supplies from Russia.
Find out why food prices are also on the rise.