• Share of income paid on electricity levies is up to four times greater for low-income households than for more affluent, new research shows. 

• Cost of levies alone for poorest households is more than their spending on bread, rice, and cereals.  

• Moving levies into general taxation could save up to £530 a year, lift more homes out of fuel poverty, and incentivise heat pump uptake.  

5 March (London): Britain’s electricity pricing system means low-income households are paying more on levies than on staple foods such as bread, rice, and cereal, a new report has found.  

These social and environmental levies are currently placed on electricity bills at three times the rate of gas. According to the report by charity The MCS Foundation, addressing this imbalance by moving levies into general taxation would save households between £170-£530 a year on their energy bills. Such a move would lift nearly 900,000 households out of fuel poverty – in addition to the 900,000 households already being lifted above the fuel poverty threshold by the measures to cut electricity costs announced in the Autumn Budget 2025 – at the same time as further accelerating the switch to heat pumps from fossil fuel heating. More than 5.8 million households would save at least £300 a year on energy bills under the proposal to move levies into general taxation. 

Garry Felgate, CEO of The MCS Foundation, said, “Social and environmental levies were introduced for a very important reason: to help fund bill-cutting measures in fuel-poor homes, and develop renewable energy infrastructure. But the way these levies are applied is now working against those vital objectives and disproportionally impacting the most vulnerable.” 

The analysis shows that some low-income households paid more than four times as much of their net income on electricity levies last year than better-off groups. Moving levies off electricity bills and into general taxation would save low-income households between £193 and £360 annually. 

Levy reform, The MCS Foundation says, would ensure the transition away from gas also means lower bills.  

In the 2025 Autumn Budget 2025, Chancellor Reeves announced that 75% of the cost of the Renewables Obligation levy would be funded by the Treasury until 2029. However, further levies are expected to be placed on electricity, driving up the proportion of bills that are made up of levies by a third by 2031.   

Garry Felgate added, “In the Autumn Budget, the Government took some positive steps towards addressing the disparity between gas and electricity prices and set a precedent for cutting the cost of electricity by moving part of the Renewables Obligation into general taxation. But this was only a temporary, partial step. We need full levy reform to deliver a fair system that benefits all UK households and incentivises the switch to cleaner heating sources such as heat pumps.” 

Matt Copeland, Head of Policy and Public Affairs at fuel poverty charity National Energy Action (NEA), said, “Low-income households are paying more in electricity levies than they spend on basic foods. There must be a fairer way to pay for the transition to net zero. If we want a fair and affordable shift to decarbonisation, we must stop loading costs onto the people least able to pay. 

“Moving levies into general taxation would save struggling households hundreds of pounds a year and would finally begin to rebalance a system that has been unfair for far too long. The government now has a vital chance to put fairness at the heart of energy policy and to ensure that the path to net zero deliberately lifts people out of fuel poverty.” 

– ends – 

Notes to editors 

• Read the report, Rebalancing electricity levies in the UK: impacts on electricity  bills, fuel poverty, and  the clean heat transition here: https://mcsfoundation.org.uk/wp-content/uploads/2026/02/MCSF-Rebalancing-Electricity-Levies-in-the-UK-Report-Final.pdf  

• The report uses the NEA definition fuel poverty, by which a household is considered fuel poor if it spends 10% or more of its income on energy costs in order to maintain a satisfactory heating regime. 

• Households that rely on electric heating such as panel heaters or electric boilers are more than twice as likely to be in fuel poverty than those who use gas central heating. See https://www.e3g.org/news/the-uk-needs-more-affordable-electric-heating-tariffs/  

• Low-income households would save £193-£360 annually if levies were moved into general taxation: fig. 20 in the report shows these savings for low-income archetypes (A1-B6). 

• Levies currently make up around 17% of an electricity bill. In contrast, levies on gas make up just 6% of bills. 

• 75% of the cost of the Renewables Obligation will be funded by the Treasury rather than levies on household bills until April 2029. From April 2026, the Energy Company Obligation levy will be removed from bills. The Government says these measures will reduce average electricity bills by £150. However the Office for Budget Responsibility forecasts that levies on electricity bills will rise by a third by 2031.  Without further reform, the benefits delivered by the measures announced in the 2025 Autumn Budget are therefore unlikely to be sustained.