New Prime Minister Cuts VAT on Electricity from October
In his first days in office, new Prime Minister Andy Burnham said his government would cut the 5% VAT on household electricity to zero from 1 October, the opening move of what he called a "cost of living government". The cut runs for six months, to the end of the financial year, and is expected to take about £45 off the annual energy price cap.
A separate £2 cap on single bus fares in England follows from January, down from the current £3. One catch on the VAT cut: it applies to electricity only, so a home that heats with gas sees less of the benefit.
Source: ITV News - tax cut on energy bills from October | Related: Real Cost of Living tool
Inflation Cooled to 2.6% in June
The Office for National Statistics said the Consumer Prices Index rose 2.6% in the 12 months to June 2026, down from 2.8% in May, in figures published on 22 July. The biggest downward pull came from cheaper motor fuels.
The catch is where inflation is still sticky. Services inflation, which the Bank of England watches closely, held at 3.7%, which leaves the Bank's 30 July rate decision genuinely open. Your own cost of living can still sit above or below the headline, depending on what you buy.
Source: ONS - Consumer price inflation, June 2026 | Related: Real Cost of Living tool, Has My Pay Kept Up With Inflation guide
Your Second Payment on Account Falls Due on 31 July
If you are in Self Assessment and pay through payments on account, the second instalment for the 2025/26 tax year is due by 31 July 2026. Each instalment is normally half of your previous year's tax bill, paid in advance. New this year, HMRC pre-populates Child Benefit details on around 300,000 returns and lets you spread the cost with a weekly or monthly payment plan.
If your income has fallen since last year, you can ask HMRC to reduce the payment - but guess too low and you will owe interest on the shortfall. Scottish taxpayers pay Scottish rates on the underlying bill.
Source: GOV.UK - Self Assessment payment services | Related: Self-Assessment Tax Bill guide, Self-Employed Tax Calculator
First Making Tax Digital Deadline Lands on 7 August
HMRC has written to more than 864,000 sole traders and landlords earning over £50,000 to say their first Making Tax Digital for Income Tax quarterly update is due by 7 August 2026. It covers 6 April to 5 July 2026 and is filed through compatible software, not the old online return.
This is not a tax return and needs no accounting adjustments; it is a running total of income and expenses. Your Self Assessment return is still due by 31 January as normal, and no penalty points apply for late quarterly updates in this first mandatory year.
Source: GOV.UK - First MTD quarterly update | Related: MTD for Income Tax guide, Employed and Self-Employed guide
October Energy Cap Forecast Trimmed to About £1,700
Cornwall Insight cut its prediction for the October to December price cap to around £1,700 a year for a typical household on 21 July, down from an earlier £1,906. The fall partly reflects the electricity VAT cut announced this week and Ofgem's revised, lower estimate of typical household usage.
Two caveats. This is a forecast, not the final figure; Ofgem confirms the October cap in late August. And higher wholesale gas prices mean bills are not expected to fall far.
Source: Cornwall Insight - October cap forecast | Related: Real Cost of Living tool
Key Dates
30 July 2026 (Thursday) - Bank of England interest-rate decision; the base rate was held at 3.75% in June.
31 July 2026 (Friday) - second Payment on Account due for 2025/26 Self Assessment.
7 August 2026 (Friday) - first Making Tax Digital quarterly update due for those earning over £50,000.
1 October 2026 (Thursday) - VAT on household electricity cut to zero for six months.