Energy regulator Ofgem has announced a 4% increase in the energy price cap for the period covering 1 October to 31 December 2026. This increase reflects higher wholesale gas prices due to the ongoing conflict in the Middle East, with volatile global gas markets remaining the dominant driver of price changes.
This includes the government's removal of VAT from all domestic electricity bills.
While this price cap increase does not directly affect businesses, as the cap applies only to domestic customers, the indirect effect of rising wholesale energy prices is likely to push the costs of commercial contracts upwards.
The energy price cap protects around 22 million households on default tariffs by limiting the maximum rates and standing charges that energy suppliers can charge. It is updated every three months to reflect changes in the underlying costs of supplying energy.
UK businesses are facing a “cost of business crisis”, according to the British Chambers of Commerce (BCC). Its new cost-stack calculator shows government policy alone has pushed up an average firm's expenses by 70% over the past decade, adding roughly £827,000 a year in costs for a typical mid-sized business. About a quarter of the rise stems from the increase in employer National Insurance contributions, with the higher minimum wage and mandatory pension auto-enrolment also major contributors.
Under Making Tax Digital (MTD) for Income Tax, sole traders and landlords with income of more than £50,000 have been required to keep digital records and send quarterly updates to HMRC since 6 April 2026.
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