VAT and a number of other miscellaneous components make up 9% of an electricity and gas bill. There are three main elements:
- Profit allowance (EBIT) is an additional amount that suppliers earn as profit. It’s set to ensure companies can make a fair return while protecting consumers from excessive charges.
- Headroom allowance and Adjustment allowance are small financial buffers that help suppliers to handle uncertain and unexpected expenses, respectively (such as extreme weather).
Energy bills include VAT (Value Added Tax), imposed on both gas and electricity bills at a rate of 5%.
