UK Energy Bills Guide 2025
How to understand, reduce, and save money on your gas and electricity bills
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Table of Contents
1. Understanding Your Energy Bill
Your energy bill might seem confusing, but understanding each part helps you spot ways to save. Here's what the key terms mean:
Bill Components
- Unit rate: Price per kWh of gas or electricity you use
- Standing charge: Daily fixed fee to maintain your supply (around 53p/day for electricity, 31p/day for gas)
- VAT: 5% on domestic energy (lower than standard 20%)
- kWh: Kilowatt hour - the standard unit of energy measurement
Average UK Energy Usage
| Home Size | Electricity (kWh/year) | Gas (kWh/year) | Typical Annual Cost |
|---|---|---|---|
| Small (1-2 bed flat) | 1,800 | 7,500 | £1,200 |
| Medium (3 bed house) | 2,700 | 11,500 | £1,738 |
| Large (4+ bed house) | 4,100 | 17,000 | £2,500 |
Reading Your Meter
Submit regular meter readings to avoid estimated bills:
- Standard meter: Read left to right, ignore numbers after decimal point
- Economy 7: You'll have two readings - day (normal) and night (low rate)
- Smart meter: Readings sent automatically, but check they're accurate
2. The Energy Price Cap Explained
The energy price cap limits what suppliers can charge for each unit of energy. It doesn't cap your total bill - if you use more energy, you'll pay more.
Price Cap History
| Period | Annual Cap | Change |
|---|---|---|
| October 2021 | £1,277 | Baseline |
| April 2022 | £1,971 | +54% |
| October 2022 | £2,500* | Government support |
| April 2023 | £2,500* | Support continues |
| July 2023 | £2,074 | -17% |
| October 2023 | £1,834 | -12% |
| January 2024 | £1,928 | +5% |
| April 2024 | £1,690 | -12% |
| October 2024 | £1,717 | +2% |
| January 2025 | £1,738 | +1% |
*Government Energy Price Guarantee capped bills
Current Unit Rates (January 2025)
| Fuel | Unit Rate | Standing Charge |
|---|---|---|
| Electricity | 24.50p/kWh | 53.35p/day |
| Gas | 6.24p/kWh | 31.43p/day |
3. What Uses Most Energy?
Understanding where your energy goes helps you target savings effectively. Heating dominates most household bills.
Typical UK Household Energy Split
- Space heating: 53% of energy use
- Hot water: 17% of energy use
- Appliances & lighting: 14% of energy use
- Cooking: 4% of energy use
- Cold appliances: 3% of energy use
- Other: 9% of energy use
Appliance Running Costs
Hidden Energy Drains
- Standby power: UK homes waste £147/year on devices on standby
- Phone chargers: Left plugged in 24/7 costs about £5/year each
- Old fridge: Pre-2000 fridges use 2-3x more than new ones
- Halogen bulbs: Use 8x more energy than LEDs
4. Heating Your Home Efficiently
Heating accounts for over half of energy bills, so getting it right makes the biggest difference.
Optimal Thermostat Settings
| Room/Area | Recommended Temp | Notes |
|---|---|---|
| Living areas | 18-21°C | When occupied |
| Bedrooms | 16-18°C | Cooler promotes better sleep |
| Bathroom | 20-22°C | During use only |
| Elderly/unwell | 21°C minimum | Health recommendation |
| Away/sleeping | 15-17°C | Setback temperature |
Heating System Efficiency Tips
- Bleed radiators: Cold spots mean trapped air, reducing efficiency
- Don't block radiators: Furniture in front wastes 30% of heat
- Use TRVs: Thermostatic radiator valves let you heat rooms individually
- Service your boiler: Annual service maintains efficiency
- Upgrade old boilers: A new A-rated boiler can save £340/year
- Use a timer: Heat only when needed, not all day
Smart Heating Controls
Smart thermostats can save 10-25% on heating by:
- Learning your schedule and preferences
- Detecting when you're away via phone location
- Allowing remote control via app
- Room-by-room temperature control
- Weather compensation (heating based on forecast)
5. 30 Ways to Cut Energy Bills
Quick Wins (Free, Immediate)
Turn off standby Save £147/year
Switch off appliances at the socket, especially TVs, games consoles, and chargers.
Reduce thermostat by 1°C Save £145/year
Most people won't notice 19°C vs 20°C, but your wallet will.
Wash at 30°C Save £40/year
Modern detergents work fine at 30°C. Reserve hot washes for heavily soiled items.
Only fill the kettle with what you need Save £18/year
Boiling a full kettle for one cup wastes energy and time.
Shower for 1 minute less Save £70/year
A 4-minute shower instead of 5 minutes saves significantly over a year.
Low-Cost Improvements (Under £50)
Draught-proof doors and windows Save £45/year
Self-adhesive draught strips cost about £10 and are easy to install.
Switch to LED bulbs Save £65/year
LEDs use 75% less energy and last 25x longer than incandescent bulbs.
Fit a hot water tank jacket Save £70/year
Jackets cost around £15 and pay back in just a few weeks.
Install radiator reflector panels Save £25/year
Reflect heat back into the room instead of warming the wall.
Medium Investments (£50-£500)
Smart thermostat Save £150/year
Cost: £150-300. Learns your habits and heats only when needed.
Energy efficient appliances Save £100+/year
When replacing appliances, choose A-rated. An A+++ fridge uses 80% less than a D-rated one.
Loft insulation top-up Save £315/year
Topping up to 270mm costs around £300 and pays back in under a year.
Major Improvements (£500+)
Cavity wall insulation Save £395/year
Cost: £500-1,500. Professional installation, often available with grants.
New condensing boiler Save £340/year
Cost: £2,500-4,000. A-rated boilers are 90%+ efficient vs 70% for old ones.
Double/triple glazing Save £155/year
Cost: £5,000-10,000. Long payback but improves comfort and noise insulation.
Solar panels Save £400+/year
Cost: £5,000-8,000. Generate free electricity, sell excess back to grid.
6. Switching Suppliers
Switching energy supplier was once the easiest way to save. In 2025, with the price cap, savings are smaller - but checking is still worthwhile.
When Switching Makes Sense
- Fixed deals below cap: Occasionally available, lock in lower rates
- Prepayment meter: Higher rates - switch to credit meter if possible
- Poor customer service: Switching costs you nothing
- Better tariff structure: Some offers suit high or low users better
How to Switch
- Gather information: Current supplier, tariff, annual usage (from bill)
- Compare: Use comparison sites like Uswitch, Compare the Market, Money Supermarket
- Check whole-market: Some deals are exclusive to certain sites
- Apply online: The new supplier handles everything
- Wait: Switch takes about 21 days
- Final bill: Check it's based on actual readings
Alternative: Better Tariff with Current Supplier
Often the easiest saving is switching tariff with your existing supplier:
- Check if they offer cheaper deals to new customers
- Ask about any loyalty discounts
- Consider online-only tariffs (cheaper to service)
- Ask about Direct Debit discount (usually 5%)
7. Energy Grants & Support
Various grants and schemes help with energy costs and efficiency improvements. Check what you're eligible for.
Warm Home Discount
For those on Pension Credit or low income with high energy costs. Applied automatically or by application depending on circumstances.
Winter Fuel Payment
For people born before September 1958. Now means-tested - must receive Pension Credit or certain other benefits.
Cold Weather Payment
Automatic payment when temperature drops below 0°C for 7+ days. For those on certain benefits.
ECO4 Scheme (Energy Company Obligation)
Free or subsidised home improvements including insulation, new boilers, and heat pumps. Income-based eligibility or Flex criteria via your council.
Great British Insulation Scheme
Available to lower-income households or those in inefficient homes (EPC D-G). Covers cavity wall, loft, and internal wall insulation.
Boiler Upgrade Scheme
Grant towards installing air source or ground source heat pumps, replacing fossil fuel heating. Must own the property.
Priority Services Register
If you're vulnerable - elderly, disabled, have a chronic illness, or have young children - register for extra support:
- Priority reconnection in power cuts
- Advance warning of planned outages
- Bill reading services
- Password protection against scams
- Accessible meter locations
8. Future-Proofing Your Home
Energy prices are unlikely to return to pre-2021 levels. Investing in efficiency now protects against future increases.
Home Energy Audit
Before major investments, get an Energy Performance Certificate (EPC) assessment to prioritise improvements:
- Shows current and potential energy rating
- Lists recommended improvements in priority order
- Estimates costs and savings for each measure
- Required for selling or renting property
Electrification Journey
The UK is moving away from gas. Consider your future energy setup:
- Heat pumps: 3-4x more efficient than gas boilers
- Solar panels: Generate free electricity, sell excess
- Battery storage: Store cheap/free electricity for later
- EV charging: If planning an electric car, prepare now
Smart Home Energy Management
Technology can optimise your energy use:
- Smart meters with real-time usage display
- Time-of-use tariffs (cheaper overnight electricity)
- Solar + battery + EV integration
- AI-powered heating that learns your patterns
Related Calculators
Plan your energy savings with our free tools:
- Energy Cost Calculator - Calculate your running costs
- Electricity Cost Calculator - Work out appliance costs
- Budget Calculator - Manage household finances
- Mortgage Calculator - Plan home improvements
James Mitchell, ACCA
Chartered Accountant & Former HMRC Advisor
James is a Chartered Certified Accountant (ACCA) specialising in UK personal taxation and financial planning. With over 12 years in practice and a background as a former HMRC compliance officer, he brings authoritative insight to complex tax topics.