Chancellor Rishi Sunak has confirmed a windfall tax on record energy profits.
The government had previously refused to commit to the policy, but had not ruled it out.
The chancellor previously announced a £200 energy bill discount, after which consumers would pay back the money over five years.
He said via Twitter:” We are introducing a temporary, targeted Energy Profits Levy charged on profits of oil and gas companies at a rate of 25%.
“We’re also building in a new investment allowance that doubles the relief for the energy companies that invest their profits in the UK,” he went on.
One third of all UK households are now set to receive one or more payments.
People claiming benefits can receive £650.
£300 extra will be given to pensioners, with another £150 set aside for each person on non means tested disability benefits.
All houses will receive a one-off £400 payment.
These payments will be sent to households in two lump sums in July and in the autumn.
It will be deposited directly into people’s bank accounts, and the chancellor claims it will aid one-third of households.
This will cost around £5 billion, which Sunak told MPs the new windfall tax will account for.
Sunak also said the new support package will be worth £9 billion.
Martin Lewis, founder of moneysavingexpert.com said: “The Loan-Not-Loan is thankfully now dead. It is now a grant coming off bills. And it is bigger. So now ALL energy bills will be reduced by a flat £400 this October. #CostOfLivingCrisis GOOD MOVE.”
Earlier today, Labour’s shadow chancellor Rachel Reeves, who has been urging for a windfall tax for months, slammed Sunak for “dragging his feet” over the policy, writing via Twitter: “Good it seems the Chancellor is finally being dragged kicking & screaming to a U turn, and four months late adopting Labour’s call for a windfall tax on oil & gas producer profits.
“Why has it taken so long?
“Why have families had to struggle and worry while he dragged his feet?”