UK Home Energy Tariffs Explained for Beginners
New to gas and electricity bills in the UK? This friendly beginner’s guide explains home energy tariffs in plain English so you can choose the right deal and avoid overpaying.
Understand your tariff, lower your bills
Most UK households pay too much for energy simply because they don’t fully understand how tariffs work. Standing charges, unit rates, fixed vs variable prices – it can quickly become confusing.
This guide walks you through the essentials step by step, so you can read your bill with confidence, compare tariffs properly and switch to a better home energy deal when you’re ready.
- Learn how UK home energy tariffs are structured
- See the key tariff types and how they affect your bill
- Discover practical ways to save money and avoid bill shocks
Get help choosing a better tariff
Share a few details and we’ll help you understand your options and what to look for before you switch.
How home energy works in the UK
Before looking at tariffs, it helps to understand what you’re actually paying for and who does what.
In the UK, your home energy bill usually covers two things: electricity and, if you have gas heating or cooking, gas. You might buy them from the same company (a dual fuel deal) or from different suppliers.
Suppliers vs networks
Your supplier is the company that bills you, sets your tariff and provides customer service. But the energy itself is delivered through regional network operators that maintain pipes, wires and meters. You can switch supplier, but you can’t normally choose your network operator.
Ofgem, the energy regulator, oversees the market and sets rules to protect households, such as price caps on standard variable tariffs and rules for vulnerable customers.
Key energy tariff terms explained
Every UK home energy tariff is based on a few core building blocks. Once you understand these, comparing deals becomes much easier.
Standing charge
This is a daily fixed fee you pay just for being connected to the energy network, even if you use no energy at all. It helps cover maintenance of pipes, cables and meters, plus some policy costs.
Unit rate
This is the price for each unit of energy you use. For electricity it’s measured in pence per kilowatt-hour (p/kWh). Gas is also billed in kWh, even though your meter may show cubic metres or cubic feet.
Dual fuel
A dual fuel tariff means you buy both gas and electricity from the same supplier. This can make bills simpler and may include a small discount, though it isn’t always the cheapest option.
Estimated vs actual readings
If you don’t have a smart meter, your supplier may estimate your usage. Submitting regular meter readings or using a smart meter means your bills are based on actual consumption, helping you avoid under- or over-paying.
How your energy bill is calculated
Your monthly or quarterly bill is a combination of your standing charge and your usage.
- Daily standing charge × number of days in the billing period
- Unit rate (p/kWh) × number of kWh you used
- Electricity and gas totals are added, plus VAT
Example (simplified):
- Standing charge: 45p per day
- Unit rate: 30p per kWh
- Billing period: 30 days
- Usage: 200 kWh
Your charge before VAT would be:
(45p × 30) + (30p × 200) = £13.50 + £60 = £73.50
Different tariffs mainly change the standing charge and the unit rate, and sometimes when the unit rate applies (e.g. cheaper at night).
Main types of UK home energy tariffs
The tariff type you choose affects how predictable your bills are and how easy it is to switch later.
1. Fixed-rate tariffs
A fixed-rate tariff locks in your unit rate (and sometimes your standing charge) for a set period, usually 12–24 months.
Pros
- Predictable prices during the fixed term
- Protection from price rises while your fix lasts
- Useful for budgeting if your usage is stable
Cons
- May include exit fees if you leave early
- If prices fall, you could end up paying more than a variable tariff
- You need to remember to switch at the end of the term
Tip: Ofgem rules allow you to switch within 49 days of your fix ending without exit fees.
2. Variable-rate tariffs
A variable tariff (often called a standard variable tariff or SVT) has unit rates that can go up or down over time.
Pros
- Normally no exit fees – you can switch at any time
- If wholesale prices fall, your tariff may become cheaper
Cons
- Less predictable bills, especially when prices are rising
- Can be more expensive than the best fixed deals
The Ofgem price cap limits how much suppliers can charge per unit on most standard variable tariffs, but it doesn’t cap your total bill – using more energy still costs more.
3. Time-of-use tariffs (e.g. Economy 7)
Time-of-use tariffs charge different prices depending on the time of day. A common example is Economy 7, which offers cheaper electricity for 7 hours at night and higher rates in the day.
Best for
- Homes with storage heaters
- Electric vehicles you can charge overnight
- People who can shift high-usage tasks (washing, charging) into off-peak hours
Newer smart meter tariffs can offer even more flexible pricing bands, sometimes with ultra-cheap rates at specific times.
4. Prepayment tariffs
With a prepayment meter, you pay in advance by topping up a key, card or smart meter. Your energy switches off if you run out of credit.
Pros
- Helps some households budget week by week
- Can prevent large unexpected bills
Cons
- Historically more expensive than standard credit tariffs
- Risk of self-disconnection if you can’t top up
- Less convenient than paying by Direct Debit
If you’re on a prepayment meter and struggling, you may have options to switch to a credit meter or access support through your supplier.
What really affects the size of your energy bill?
Your tariff matters, but so do your home, your habits and how you pay.
1. Your home and insulation
Property type, age, insulation levels, windows and heating system all change how much energy you need to stay warm. Well-insulated homes use less gas and electricity for the same comfort.
2. Number of occupants
More people usually means more showers, cooking, washing and device charging – and higher usage. Single-occupant flats typically have lower bills than large family homes.
3. Payment method
Many suppliers offer lower prices if you pay by monthly Direct Debit and choose paperless billing. Paying on receipt of bill or in cash may cost more.
4. Smart meters and monitoring
A smart meter sends automatic readings and comes with an in-home display. Seeing your real-time usage helps you spot waste and track the impact of changes.
5. Tariff choice
Fixed vs variable, single-rate vs time-of-use and whether you go dual fuel can easily change your annual costs by hundreds of pounds, especially in higher-usage homes.
6. Lifestyle and working patterns
Working from home, using electric heating or running appliances at peak times all add up. Small habits such as lowering the thermostat or shorter showers can make a noticeable difference.
How to choose the right home energy tariff
Follow these simple steps to narrow down your options and find a tariff that fits your household.
1. Start with your current bill
Grab your latest gas and electricity bill and look for:
- Your current tariff name and whether it’s fixed or variable
- Your unit rates and standing charges
- Your annual usage (kWh for gas and electricity)
- The end date of any fixed tariff and possible exit fees
This gives you a baseline so you can compare new tariffs on a like-for-like basis.
2. Decide what matters most to you
Everyone’s priorities are different. Ask yourself:
- Do I want price certainty (fixed) or flexibility (variable)?
- Am I willing to switch again in 12 months if deals change?
- Would a time-of-use tariff suit my lifestyle?
- Is good customer service worth paying a little more for?
3. Compare tariffs using your real usage
When you use comparison tools or talk to a supplier, always provide your actual kWh usage rather than just your monthly spend. This makes cost estimates more accurate and avoids surprises later.
Look closely at:
- The unit rate and standing charge for each fuel
- The tariff length and any exit fees
- Payment method (Direct Debit often cheaper)
- Any introductory discounts or perks, and when they end
4. Check eligibility and small print
Before you sign up for a tariff, make sure you:
- Confirm whether you need a smart meter installed
- Check any minimum contract term or exit charges
- Understand how prices could change when the fixed period ends
- Know how you’ll receive your bills (online vs paper)
Fixed vs variable vs time-of-use: quick comparison
| Tariff type | Best for | Biggest benefit | Main risk |
|---|---|---|---|
| Fixed-rate | People who want predictable pricing | Protection from price rises during the fixed term | Exit fees and missing out if prices fall sharply |
| Variable | People who value flexibility | Can switch any time, may benefit from price cuts | Less predictable bills if prices rise |
| Time-of-use | Homes that use more power off-peak | Cheaper rates during night or off-peak times | Daytime rates can be higher if you can’t shift usage |
| Prepayment | Strict budgeting or debt arrangements | Pay-as-you-go control over spend | Risk of losing supply if you can’t top up |
Simple ways to cut your home energy costs
You don’t need a full renovation to make a difference. Start with these beginner-friendly changes.
1. Optimise your heating
- Lower your thermostat by 1°C if it still feels comfortable
- Use programmer settings so heating isn’t on when nobody’s home
- Bleed radiators and don’t cover them with furniture or curtains
- Close doors to keep heat in the rooms you’re using
Heating is usually the biggest part of your bill, so small tweaks go a long way.
2. Reduce everyday electricity use
- Swap old bulbs for LEDs
- Turn devices off at the socket instead of leaving them on standby
- Use eco modes on washing machines and dishwashers
- Dry clothes on racks when possible, not a tumble dryer
Combining these changes with the right tariff multiplies your savings.
3. Make the most of a smart meter
- Check your in-home display to see which appliances use the most
- Track your daily or weekly spend and set personal targets
- Use the data to decide if a time-of-use tariff could work for you
4. Review your tariff regularly
- Set a reminder 4–6 weeks before your fixed deal ends
- Compare tariffs at least once a year or after big life changes
- Check you’re still on the best payment method and correct meter type
Beginner FAQs on UK home energy tariffs
Straightforward answers to the questions most UK households ask when they start looking at tariffs.
Check the first page of your latest gas or electricity bill or log in to your online account. Your tariff name will usually be listed near your account number and payment details, along with whether it’s fixed or variable and when it ends.
If you’re responsible for paying the energy bills directly (the account is in your name), you usually can switch, even if you rent. Check your tenancy agreement – it may ask you to inform your landlord, but it rarely forbids switching outright.
If your landlord includes energy in the rent and holds the account, you can’t switch yourself, but you can ask them to consider a better tariff.
No. In the UK, switching supplier is designed to be seamless. There is no physical interruption to your gas or electricity supply – only the company that bills you changes. You use the same pipes, cables and meters.
The price cap is a limit set by Ofgem on the maximum unit rates and standing charges that suppliers can charge most households on standard variable tariffs. It is reviewed regularly and can go up or down.
It does not cap your total bill – the more energy you use, the more you pay – but it does limit how expensive standard variable tariffs can be.
Not always. Dual fuel can be more convenient and sometimes includes a discount, but the cheapest overall option for you might be getting gas and electricity from different suppliers. Always compare the total annual cost rather than assuming dual fuel is best.
Need help making sense of your tariff?
If you’re still unsure which UK home energy tariff is right for you, share a few details and we’ll help you understand your options before you commit to anything.
No jargon, no hard sell – just clear explanations tailored to your home.
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