Energy prices and a council tax rebate – what do tenants need to know from April?
The increase to the energy price cap – which came into effect on April 1 2022 – will heavily impact the amount millions of tenants across the UK will pay on their energy bills.
The hike further tightens the pressure on tenants who are already experiencing rising day-to-day living costs due to soaring inflation, which is expected to reach more than 7% in April – levels not seen for decades.
However, the Government aims to ease the financial strain, announcing a council tax rebate of £150 to millions of households this spring.
While tenants are anticipating a challenging year ahead, knowing the fundamentals of the energy price cap and the upcoming council tax rebate can potentially ease the financial burden for many.
Why is the energy cap rising?
The energy price cap is the maximum amount that energy suppliers can charge customers for the amount of energy they use.
Introduced by energy regulatory company Ofgem in January 2019, the cap applies to those on a default energy tariff – whether it is by direct debit, standard credit, or a prepayment meter.
Last year saw a worldwide squeeze on energy supplies, due in part to a particularly cold winter in Europe, increased demand from China and other parts of Asia, and spiking wholesale prices following the invasion of Ukraine by Russia – the world's largest exporter of natural gas.
The strain put on companies has led to the crash of 28 energy companies responsible for more than two million homes.
Consequently, the energy price cap hike will see around 18 million households on standard tariffs pay at least £693 more per year. Approximately 4.5 million prepayment customers will see an average increase of £708 – from £1,309 to £2,017.
Energy bills for customers on fixed rates won't rise instantly, but many will see a significant increase when their deal ends.
How will the Government support tenants?
Today's tenants face fuel poverty as they spend a disproportionate amount of their income on energy. This, coupled with affordability declining in the rental market, presents a bleak picture for renters.
To support badly-affected households, the Government has proposed a £150 energy bills council tax rebate from April 1 and a one-off £200 discount on their energy bill this autumn.
Eligible to those in council tax bands A-D, the rebate comes as part of a £9 billion package to help spread the cost of rising energy bills.
The Government says four out of five households will benefit from the scheme, including around 95% of rented homes, of which none of it has to be repaid.
Following dismal new economic forecasts and a poor response to his spring statement on March 23, Chancellor Rishi Sunak is allegedly 'weighing up' a further rebate on council tax bills as part of a new multi-billion pound package.
Meanwhile, customers in England, Wales and Scotland will receive a £200 rebate on their energy bills. This will need to be paid back at £40 instalments over five years starting in April 2023, when global wholesale energy prices are expected to reduce.
Are there other incentives available?
Beyond the rebate schemes, other incentives are being made available to tenants. Local authorities in England will also have access to a £150 million fund to assist lower-income households living in higher council tax properties. It will also help households in bands A to D who already don't pay council tax.
The Warm Home Discount Scheme will also be extended to cover three million households. The scheme currently offers low-income households a one-off annual discount on their electricity bill. It was worth £140 in 2021/22.
As the council tax measures are exclusive to England, some £565 million will be offered to other UK nations to fund equivalent help.
And while the Northern Ireland energy market is separate, the Government has pledged to offer £150 million to support households.
How can tenants offset rising prices?
As a standard, it's in your best interest to shop around for the best tariffs when bills rise. However, soaring wholesale energy prices may make this more challenging.
Those already on fixed deals are advised to stay put if they have a fix that is cheaper than the new cap.
Keep in mind that you can lock in a price for the next 12 months if you switch and fix. This may be more expensive than the current cap but would protect against future price rises when the cap increases again in October, so it's worth checking which would be cheaper in the long run before switching.
Other households are being encouraged to improve the energy efficiency of their homes. With around 21% of the UK's carbon emissions coming from properties, Energy Saving Trust says simple changes to our habits could equalize the current price rises.
These include switching gadgets off standby and moving to energy-saving lightbulbs. Draught-proofing the home, turning the thermostat down one degree and doing one less wash a week for the washing machine or dishwasher are other inexpensive ways to decrease costs.