Monday, September 1, 2014
Before you ring the police or Revenue and Customs and report me for tax evasion, I use the term ‘tax’loosely. The Daily Mail recently lambasted Ed Davey, the cabinet minister for the Department of Energy and Climate Change, for dodging tax that is charged on the majority of domestic energy bills. Before we all march off to Mr Davey’s house with pitch forks and torches, we should maybe go a bit deeper into the story (which I note the Daily Mail fails to do).
Firstly, Ed Davey has not done anything illegal, nor anything which ANY consumer can’t do. He simply switched to a ‘small’energy supplier, incidentally called Green Start Energy. The key thing here is the Green Star Energy is small, with less that 250, 000 customers.
Now, lets get into some more detail. ALL energy bills include tax, this is in the form of VAT. On energy bills this is levied at a reduced rate of 5%, typically on most products and services this is 20%.
When is a tax not a tax? When it is called a ‘social charge’ In addition a number of other charges are levied on energy bills. These are social charges and levies are aimed at addressing a number of issues. Typically, social and environmental charges make up 7% (approximately £90 on a typical bill, explore a break down of bills here).
Though they are on many of our bills, there seems to be some confusion as to what these ‘social and environmental charges’are and what they are for. There are a couple: the Warm Homes Discount (WHD) and the Energy Company Obligation (ECO). The WHD supports some eligible pensioners for a discount on their energy bills and ECO is used by energy companies to fund energy efficiency programmes. The important thing is that a energy provider that has more than 250, 000 customers are included in these schemes. Therefore, small new suppliers could be cheaper for you.
There are a range of new small energy suppliers that have started supplying domestic energy, Besides, Green Star Energy there is Ecotrcity, OVO Energy to name but a few. To find if you could switch to one of these new suppliers you will need to undertake a comparison. To do this there are a great range online tools to help you do this: uSwitch, Money Supermarket, UKPower.co.uk etc.
Have you switched to one of the new small energy suppliers? If so, was it because you were saving money, and how much? Share your experiences on the forum.
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GB Energy Supply ceases trading – Guide for customers
GB Energy Supply, one of the newest, and in the past cheapest energy suppliers, has ceased trading. 160,000 customers, have been attracted to the company over the past couple of years because of their market leading cheap energy prices (and I count myself as one of these). DO NOT PANIC! The company and Ofgem have […]Read more