💡 SwitchInsights
What's Happening?
From 1 April 2026, two big charges are being removed from your energy bill:
- The insulation scheme levy (called ECO) — ending completely
- The renewables levy (called RO) — 75% being paid by government instead of you
The government is claiming this will save you £150 per year. For a typical household, it's actually closer to £134 off the price cap.
This won't show up in January–March 2026 bills. The official price cap including these savings will be announced on 25 February 2026, taking effect from April.
What Are These Charges?
The Renewables Levy (RO) — This makes energy companies buy a percentage of their electricity from wind farms, solar, etc. You've been paying for it through your bill — over £8.5 billion a year in total. From April, 75% of this will come from taxes instead of your bill, saving about £88 per year.
The Insulation Scheme (ECO) — Since 2013, this has funded insulation and heating upgrades for low-income homes — over £13 billion spent on 2.6 million homes. It costs about £60 per year on your bill. The government is ending it completely in March 2026.
Where Does the £150 Come From?
Here's how the government gets to that number:
That's £154 total — rounded to £150 in headlines. But the government uses a slightly different "average" household than the price cap does. Using the price cap definition, it's £134 saved.
Here's the catch. The £88 from the renewables levy isn't really a "saving" — it's just being paid through taxes instead of your bill. You're still paying it, just differently. Only the £59 from ending the insulation scheme is a genuine cut — but that means scrapping the UK's main programme for insulating fuel-poor homes.
Notice something? Almost all the saving is on electricity. Gas barely changes. This matters for anyone thinking about heat pumps.
Will Bills Actually Go Down?
Without these budget changes, bills were heading up — forecasts predicted £60-£80 more from April, thanks to new charges and rising network costs.
Now? Instead of going up £60-£80, bills should go down by £55-£75.
But don't expect a dramatically lower bill. Network costs (the fee for using the national grid) are jumping from £51 to £93 per year. That's enough to push the price cap over £1,800 again from April 2026.
The reality: these budget measures offset rising costs rather than delivering a genuine drop from today's levels. They're stopping things from getting worse, not making them much better.
The Catches
It's temporary: The government funding ends in March 2029. After that, these costs go back on your bill. Conveniently, that's just before the next election.
Insulation loses big: Ending ECO takes away £1.7 billion per year from home insulation for low-income households. The replacement? Just £500 million per year. That's a massive cut to the UK's main energy efficiency programme.
Businesses get nothing: These levies only applied to homes. Businesses don't benefit at all.
What About Heat Pumps?
For a heat pump to save you money vs a gas boiler, electricity needs to cost no more than about 3.4× what gas costs. Right now, electricity costs nearly 5× as much.
The budget improves the ratio from 4.7:1 to 4.3:1. Better, but still nowhere near the 3:1 needed to make heat pumps financially attractive.
What This Means For You
If you're on a standard tariff: You'll see the £134 reduction from April 2026 — but rising network costs will eat into much of it.
If you're on a fixed deal: The government expects these savings to be passed on. Martin Lewis has pushed for this to be guaranteed — check whether your supplier has committed.
If you're in Northern Ireland: The insulation scheme doesn't apply there, so you'll only see part of the savings.