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How will the Government's Windfall Tax help?
The windfall tax on energy firms came into effect on the 26th of May, after it was announced by the UK government and then-Chancellor Rishi Sunak.
It was passed as a response to the Cost of Living Crisis, which has forced most household energy bills to increase at a time when inflation has hit a 40-year high. And, with the tax estimated to generate about £5 billion in its first year, it will aim to help millions of people facing fuel poverty this winter.
At the time of writing, BP and Shell have recently reported record-high quarterly profits. Most other energy companies are also benefitting from higher oil and gas prices. Thus, many are wondering whether the 25% profits levy, which only affects money earned by these companies after it came into effect, will be enough to support everyone.
Of course, many concerned families are also asking: how will the windfall next help my household?
What is a windfall tax?
A windfall tax is typically a one-off charge on companies that have made significant profits. It is often, as is the case here, a tax on profits that were made due to highly favourable conditions, rather than any innovation on the part of the company.
What support will families get?
The £5 billion that this tax hopes to raise will be used to fund a £400 energy bill discount that all households will receive this October. More than 8 million low-income households will receive a slightly higher amount, from a double payment totalling £650 to support their rising energy bills. You can see if your family qualifies for this on the government portal.
Is this enough help?
Whilst no support at all would be catastrophic for many, the current windfall tax plans have been criticised for not going far enough. Consumer expert Martin Lewis has said the crisis is at the same level as the Covid-19 Pandemic and has called for the above support to be doubled. This sentiment has been echoed by the bosses of Octopus Energy and Utilita, with the latter stating the support needs to increase by £800-£1000 per household.
As of right now, however, the government is yet to offer more help, with many not expecting an announcement until the new PM is chosen.
Energy Saving Support from Wiser
Wiser is proud to offer Smart Heating Controls that can Reduce Household Energy Bills by up to £450 a Year. But, like the windfall tax support, we understand that this will not be enough for many households this winter.
That’s why we’re trying to offer as much advice on the cost of living crisis as we can, and you can find some of our recent money-saving articles below: