Government announces one-off payments to help with energy cost crisis

Today, Thursday 26th May 2022, Chancellor Rishi Sunak announced new measures to support households amidst rapidly rising energy costs.

During the Spring Statement on 23rd March 2022, the Chancellor announced fuel cost crisis measures including a cut in fuel duty, 0% VAT on the installation of energy saving materials such as solar panels, and doubling the Household Support Fund to £1 billion.

Energy Bills Support Scheme

Previously, Rishi Sunak announced a repayable £200 discount on bills for homes from October 2022. Today, the Chancellor has now increased this to £400 which will not need to be repaid.

Energy suppliers will deliver this support to households with a domestic electricity meter over six months from October. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.

This support is in addition to the £150 Council Tax rebate for households in England in Council Tax bands A-D, which was announced in February, and which millions of households have already received.

One-off £650 Cost of Living Payment for those on means tested benefits.

This will go directly to the lowest income households which will be worth over £5 billion, with no need for people to fill out forms – the payment will be made straight into the eligible people’s bank accounts.

This includes all households receiving 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

DWP will make the payment in two lump sums – the first from July, the second in the autumn. Payments from HMRC for those on tax credits only will follow shortly after each to avoid duplicate payments.

This payment will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

From autumn, over 8 million pensioner households who receive the Winter Fuel Payment will be given an extra, one-off pensioner payment of £300.

This will be paid on top of any other one-off support a pensioner household is entitled to, for example where they are on pension credit or receive disability benefits. Eligible households currently receive between £200 – £300.

All pensioner households will get the one-off Pensioner Cost of Living Payment as a top-up to their annual Winter Fuel Payment in November/December. For most pensioner households, this will be paid by direct debit.

People will be eligible for this payment if they are over State Pension age (aged 66 or above) between 19 – 25 September 2022. There are certain circumstances where an individual above State Pension age does not qualify for the Winter Fuel Payment which can be found here.

6 million people who receive non-means tested disability benefits will receive an extra one-off payment worth £150.

These payments will be exempt from tax, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

The government will make these payments directly to eligible people across the UK.

£500m increase and extension of Household Support Fund

To support people who need additional help, the Government is providing an extra £500 million of local support, via the Household Support Fund, which will be extended from this October to March 2023.

The Household Support Fund helps those in most need with payments towards the rising cost of food, energy, and water bills.

The government will issue additional guidance to Local Authorities to ensure support is targeted towards those most in need of support, including those not eligible for the Cost of Living Payments set out on 26 May 2022.

The measures will be funded in part (£5 billion) by a windfall tax on profits from energy firms at 25%. There will also be a new investment allowance for the oil and gas sector that doubles the relief for companies that invest their profits in the UK. The tax will take effect from today, 26 May 2022, and will be legislated for via a standalone Bill to be introduced shortly.

In future years, if oil and gas prices return to historically more normal levels, the Government will phase out the Energy Profits Levy, and also the legislation will include a sunset clause, effective at the end of December 2025.

Click here to see the full Cost of Living Support package on gov.uk.