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Updated: 23 Jun 2022

Every household to get £400 energy grant in new cost of living measures

Millions of low income households will receive the first of two cost of living payments from 14 July
Chancellor Rishi Sunak announced a £9bn support package for Britons struggling with the cost of living
Chancellor Rishi Sunak announced a £9bn support package for Britons struggling with the cost of living

Millions of struggling households across the UK will get extra financial help later this year to help cope with skyrocketing energy prices. Those on the lowest income will receive the first part of a £650 cost of living payment from 14 July.

The £15bn support package, announced by the Chancellor, Rishi Sunak, on 26 May 2022, aims to ease the squeeze felt by millions of Britons during the cost of living crisis. The plans will be funded by a temporary windfall tax on energy companies – a policy which has faced fierce opposition from some cabinet ministers in the past.

It comes after news that energy regulator Ofgem expects the energy price cap to rise by as much as £800 from October, pushing bills for the average household to £2,800 a year. 

The cost of the weekly shop has also risen by 7%, leaving more than a fifth of households in Britain saying they are struggling to make ends meet, according to market research group Kantar.

A raft of measures were announced in February to help with the cost of living, but the government has been under increasing pressure to go further after inflation reached a 40-year high of 9%, and energy regulator Ofgem warned that 12 million households could be placed into fuel poverty this winter. 

The support, announced on 26 May, will be on the same terms in every part of the UK, including Northern Ireland. Measures have also been taken to ensure local government and energy companies deliver cost-of-living payments to customers who are most vulnerable or at risk of falling through the cracks.

Here, we break down the measures the government is now planning to roll-out. For more help with the increasing cost of living, head to our money-saving advice.

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One-off £400 energy grant for all households

Plans to give all domestic electricity customers a £200 credit on their energy bill in October 2022 – to be repaid over five years – have been scrapped. 

Instead, all households will receive twice that amount. £400 will be paid as a credit onto your energy bill in October, and it won't need to be paid back. 

While this will help ease the strain for a lot of households, it won't cover the full cost of energy price rises. 

Read more: If you're trying to cut down your energy usage, find out 10 ways to save on your energy bills

Additional payments for vulnerable groups

As well as the £400 grant, targeted support for pensioners, those on low incomes and those with disabilities will also be coming later this year.

£650 for those receiving means-tested benefits

The Chancellor announced that 8m of the lowest income households in the UK will each receive a £650 cost-of-living payment, bringing the total support to more than £1,000. 

To be eligible, you must be receiving certain means-tested benefits in July. This includes Universal Credit, tax credits, pension credit and other means-tested benefits. 

The money will be paid directly into people’s accounts from the Department for Work and Pensions (DWP) in two lump sums. 

The government announced that the first payment of £326 would begin being paid to the qualifying 8m UK households from 14 July, with the second payment of £324 to follow in the autumn. Payments from HMRC for those receiving tax credits will follow shortly afterwards.

£150 for those receiving non-means-tested disability benefit

If you are disabled and are one of the six million people who receive non-means-tested disability benefits, you will be given an extra one-off cost-of-living payment worth £150. 

Any disabled people who also receive means-tested benefits can receive the £650 payment in addition to the £150, bringing the total payment to £800.

£300 for pensioners receiving Winter Fuel Payment

Finally, pensioners who currently receive the government’s Winter Fuel Payment – set up to help cover the costs of energy bills during the colder months – will be given an extra one-off sum of £300 in the autumn.

To be eligible for the Winter Fuel Payment, you must be born on or before 26 September 1956. Payments are between £100 to £300, depending on your age and circumstances. 

Those on lower incomes who claim pension credit will also receive the £650 as part of the means-tested benefits package above.

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Read more: Find out what help is available if you're struggling to pay your energy bill.

How will the money be paid?

The £400 energy grant will be given to customers directly by their energy supplier. The amount will be knocked off customers' bills from October 2022 and you don't need to apply for it. If you've set up an automatic credit card payment or direct debit, the money will be credited to your account. Customers with pre-payment meters will have the money applied to their meter or paid via a voucher. 

As already mentioned, the £650 cost of living support money will be paid directly into eligible people’s accounts from the Department for Work and Pensions (DWP) in two lump sums. The first of which will be paid from 14 July.

Steps are also being taken to ensure that vulnerable groups that are more likely to pay bills by cash and cheque, and who may not have already registered their bank details, are identified and don't miss out on the government's cost of living support.

The Confirmation of Payee service – a banking security measure that helps to make sure payments aren't sent to the wrong bank or building society account – is working with payment system provider PayPoint to ensure these customers are given alternative ways to access the funding, and are not excluded.

Extension of the Household Support Fund

In order to help those who may 'fall through the cracks' – for example, people on housing benefit who are not claiming any other benefits – Sunak says the government will extend the Household Support Fund, delivered by local authorities, by £500m from October.

The Household Support Fund is a measure that provides households with payments to help with essentials such as food, utilities and clothing. It was first introduced in September 2021 and was due to run until 31 March 2022, before being extended. Half of the fund is set aside for households with children.

State pension triple lock confirmed

In addition to the one-off payments, the Chancellor confirmed that the state pension triple lock would be reinstated for 2023-24; it was temporarily changed to a 'double lock' for this year due to high inflation.

This means state pension payments will increase by either wage growth, September CPI inflation, or 2.5% – whichever is highest. 

Seeing as the Bank of England predicts that inflation will average at 9% for the rest of the year, it's likely pensioners will see their payments increase by much more than usual next April.

Benefit payments will also increase by September's CPI inflation, providing an uplift for claimants next year.

Rocio Concha, Which? director of policy and advocacy, said: 'Millions of people are facing soaring living costs, and the prospect of a further hike of around £800 to the energy price cap will have caused serious concern for families up and down the country who are already struggling to make ends meet.

'The government's decision to give a £400 grant to all households towards their energy bills will bring relief to many people. It's also positive that an additional targeted £650 payment will be made available to those on the lowest incomes to help prevent them falling into fuel poverty. The success of these measures will be judged on whether financial help is getting to and continues to help the most vulnerable through the cost of living crisis.

'The government and regulators must also ensure people can rely on robust consumer protections that will prevent them from being exploited by businesses. Ofgem must move quickly on its pledge to take tough action against energy suppliers that are charging people too much for direct debits – and send a clear message that this behaviour from businesses is totally unacceptable.'

Editor's note: This article was first published on 26 May and has updated since then. It was last updated on 23 June to provide further details on how the money will be paid.