Spotlight: Electricity VAT Cuts and GCSE Business

This is the first in the new Spotlight series from Study Smiles which highlights and links current affairs to elements of the GCSE Business (Edexcel) and GCSE Statistics (Edexcel) specification.

An ideal way to consolidate your learning and build a bank of examples.

Our first Spotlight is on GCSE Business and VAT cuts on household electricity bills.

GCSE Business and VAT cuts on household electricity bills

The UK’s new prime minister, Andy Burnham, has announced that VAT (Value Added Tax) will be cut from household electricity bills from 1^st October 2026. 

In GCSE Business (Edexcel) we study the relationship between the economy and business, including the effects of consumer income and Government taxation.   So, what impact will this proposed VAT cut have on businesses?

The energy suppliers have been told that they should pass the VAT reduction on to household customers, meaning that the amount consumers spend on energy will reduce.  Essentially, the Government is trying to increase consumer income, specifically due to the cost of living crisis, thereby giving consumers additional money to spend on other products. This could, therefore, result in increased sales for other businesses.