Fixed vs Variable Home Energy Tariff Explained

Your home energy tariff is the plan you are on for your gas and electricity. It sets out how much you pay per unit of energy you use (measured in kWh) and any standing charges, discounts or exit fees. In the UK, most suppliers offer two main types of domestic tariff:

• Fixed rate tariffs – your unit rates are locked in for a set period.
• Variable rate tariffs – your unit rates can go up or down over time.

Understanding the difference between fixed and variable tariffs can help you avoid bill shock, manage risk and potentially save hundreds of pounds a year on your home energy bills.

A fixed rate home energy tariff means the price you pay per unit of gas and electricity is locked in for a set period, usually 12, 18 or 24 months. Your unit rate (pence per kWh) and standing charge stay the same for the duration of the contract.

Your monthly bill can still change depending on how much energy you use, but the rate you are charged for each unit will not increase or decrease during the fixed term.

Key features of fixed tariffs

• Unit rates and standing charges are guaranteed for the contract length.
• Protection from price rises in the wider energy market.
• Often come with exit fees if you leave early.
• May be slightly higher than variable rates at the time you sign up, in exchange for price certainty.

Fixed tariffs are popular with households that want budget certainty and prefer to know exactly what rate they will pay for the next year or two.

A variable rate home energy tariff means the price you pay per unit of gas and electricity can go up or down over time. Your supplier can change your unit rate in line with wholesale energy costs and other factors.

Most suppliers' standard variable tariffs for domestic customers are subject to the Ofgem energy price cap, which limits the maximum unit rates and standing charges they can charge for default tariffs.

Key features of variable tariffs

• Unit rates can change, usually with 30 days' notice.
• You may benefit when wholesale prices fall.
• Typically no exit fees, so you can switch at any time.
• Less certainty about future bills.

Variable tariffs can suit households that value flexibility and want to be able to move quickly if a better deal appears on the market.

Consider a fixed home energy tariff if:

• You want stable bills and dislike surprises.
• You are on a tight budget and need predictability.
• You believe prices are more likely to rise than fall.
• You have just moved home and want to lock in a good rate.
• You are happy to stay with the same supplier for the contract term.

If you choose to fix, compare deals carefully and check the exit fees. Ofgem rules allow you to switch in the last 49 days of your fixed term without paying an exit fee.

Consider a variable home energy tariff if:

• You value flexibility and want the option to switch at any time.
• You regularly review your bills and are happy to move deals.
• You think prices might fall or have already peaked.
• You don't want to commit to a long fixed contract.
• You are currently on your supplier's standard variable tariff and want to stay under the Ofgem price cap.

Variable tariffs can work well for engaged consumers who are comfortable tracking the market and switching when better offers appear.

1. Look at your past usage

Check your last 12 months of bills or your online account. Knowing your annual kWh usage for gas and electricity helps you compare tariffs accurately and see the potential impact of price changes.

2. Consider your household budget

If your finances are tight, a fixed rate can make planning easier. If you have more flexibility and want to chase savings, a variable tariff might suit you.

3. Review exit fees and contract terms

Some fixed tariffs charge £30–£60 per fuel if you leave early. Factor this into your decision – especially if you expect to move home or switch supplier within the next year.

4. Check current market trends

Energy prices can be volatile. Read recent news, supplier updates and Ofgem announcements. If forecasts suggest rising prices, fixing may offer good value; if prices are expected to fall, a variable tariff may be better.

5. Think about your risk appetite

Some people prefer certainty even if it might cost a little more. Others are happy to accept some risk to potentially save money. There is no one-size-fits-all answer – the right tariff is the one that matches your comfort level.

6. Don't ignore your tariff end date

If you are on a fixed deal, set a reminder for 6–8 weeks before your contract end date. This gives you time to compare new tariffs without rolling onto a potentially more expensive standard variable rate.

Will my bill stay the same on a fixed tariff?

Your unit rate and standing charge stay the same, but your monthly bill can still change based on how much energy you use. If your usage goes up in winter, your bill will still be higher than in summer, even on a fixed tariff.

Can I leave a fixed tariff early?

In most cases you can, but you may pay an exit fee. Check your tariff terms. Ofgem rules mean suppliers cannot charge exit fees in the final 49 days of your fixed contract.

Are variable tariffs always more expensive?

No. At times, a standard variable tariff can be cheaper than available fixed deals, particularly if wholesale prices are falling. Costs depend on the market and the specific tariffs on offer.

Is it worth fixing my energy prices now?

It depends on your personal situation and expectations about future prices. Compare your current variable rates, any available fixed offers, and read recent guidance from Ofgem and consumer groups before deciding.

What happens when my fixed tariff ends?

If you do nothing, your supplier will usually move you to their standard variable tariff, which is protected by the price cap. This may be more expensive, so it is worth comparing new deals before your fix ends.

Do green or renewable tariffs have to be fixed or variable?

Green and renewable energy tariffs can be either fixed or variable. The same principles apply: check unit rates, contract length, exit fees and whether the tariff suits your budget and preferences.