Government rakes in £2.6bn from soaring energy prices with 5% VAT on bills

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When energy regulator Ofgem raised its price cap in October to an average of £1,277 a year, it would have generated around £1.64 billion pounds a year in VAT, price comparison website TheEnergyShop.com found

The rise in the cost of energy bills is inflating the Treasury (

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A spike in energy prices is set to net the government an extra £2.6bn, experts say.

The massive increase in the cost of gas and electricity boosts the Treasury thanks to the 5% VAT applied to invoices.

Labour wants the levy scrapped to ease pressure on customers hit by the cost of living.

When energy regulator Ofgem raised its price cap in October to an average of £1,277 a year, it would have generated around £1.64 billion a year in VAT, according to the website. TheEnergyShop.com price comparison.

This April, when the cap was raised to £1,971 a year, that would have increased the annual tax to £2.53 billion.

Britons face higher bills (

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Getty Images)

If the cap explodes in October to £3,285 a year, according to TheEnergyShop.com, it would net £4.22 billion.

That's £2.58 billion more VAT over 12 months than the October cap.

Joe Malinowski, founder of TheEnergyShop.com, said, "VAT receipts will see the Treasury coffers flooded with cash."

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