A fixed tariff locks your unit rates and standing charges for a set period, usually 12 or 24 months. A variable tariff moves with Ofgem's price cap, which changes every three months. Neither is automatically cheaper. Whether fixing saves you money depends on the price of the fix you can get today, where the cap is likely to go next, and how much certainty is worth to you. This guide shows you how each works and gives you a simple method to compare the actual pounds for your own home.
The short answer. There is no permanent winner. Fixing is cheaper when the fixed deal undercuts the price cap and the cap then rises during your contract. The variable cap is cheaper when fixed prices sit above it and the cap then falls. In mid-2026 the best fixes sit roughly 3 to 8 per cent below the July cap, so fixing now mainly buys protection against the next rise rather than a large instant saving.
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What each tariff actually is
Every domestic energy tariff is built from the same parts: a unit rate for each kWh of gas and electricity you use, plus a daily standing charge for each fuel that you pay even when you use nothing. The difference between fixed and variable is simply whether those numbers can change while you are on the deal.
A variable tariff, usually called a standard variable tariff or SVT, has prices that can move. For most households these prices are limited by Ofgem's price cap, which sets a maximum unit rate and standing charge and is reviewed every three months. When the cap goes up or down, your variable tariff follows it. There is no exit fee, so you can leave at any time.
A fixed tariff locks your unit rates and standing charges for the length of the contract. If the cap rises, you keep your locked price and pay less than cap customers. If the cap falls below your fixed price, you pay more than they do. Most fixed deals carry an exit fee if you leave early, often around £25 to £75 per fuel, though some are now fee-free.
A common myth is that a fixed tariff fixes your bill. It does not. It fixes the price per unit. Use more energy and your bill still goes up. For more on how the pieces fit together, see our guide to understanding your energy bill and the breakdown of standing charges.
How the price cap drives the variable side
The variable tariff is only as good or bad as the current cap. Ofgem sets the cap level using wholesale prices, network costs and policy charges, then updates it four times a year. Because it tracks the market with a delay, the variable rate tends to lag behind what is actually happening to gas prices. When wholesale costs fall, variable customers usually wait a quarter to feel it. When costs spike, the same delay protects them briefly before the next rise lands.
The figures below are the cap rates for Great Britain on a direct debit, for the period 1 October to 31 December 2026. These are the numbers a variable customer pays during that quarter, and they are also your benchmark when you judge any fixed offer.
| Element | Electricity | Gas |
|---|---|---|
| Unit rate | 26.32p per kWh | 7.97p per kWh |
| Standing charge | 54.83p per day | 29.68p per day |
At 26.32p per kWh electricity and 7.97p per kWh gas, Ofgem price cap, Great Britain direct debit average, 1 October to 31 December 2026.
The cap is a cap on rates, not a cap on your total bill, and it is reset every quarter. If you want the full mechanism, read how the energy price cap works. If you only ever stay on the default variable tariff, you are accepting whatever the cap does next, in both directions.
When fixing wins and when it loses
Fixing is a bet on the direction of the cap, plus a price for certainty. Break it into two questions.
Is the fix cheaper than the cap today? Compare the fixed deal's unit rates and standing charges against the cap numbers above. If the fix is already below cap, you save from day one. If it is above cap, you are paying a premium now in the hope the cap rises later.
Where is the cap heading? Nobody knows for certain, but the shape of the bet is clear:
- Fixing is cheaper overall when you lock a rate at or below the current cap and the cap then climbs during your contract. You dodge every rise.
- The variable cap is cheaper when fixed prices are above the cap and the cap then drops. You would have been paying a premium for falls you never needed protection from.
In mid-2026 the most competitive 12-month fixes sit a few per cent below the July cap. That means fixing now gives a small immediate saving and, more usefully, shelter if the next cap review pushes prices up. The instant saving is modest. The protection is the real product. If your current fixed deal is ending, our guide on what to do when your fix ends walks through the choice in detail.
How to compare the two for your own home
Ignore the headline "average annual cost" figure that comparison sites show. It is based on a typical household and may look nothing like yours. Work it out with your own usage instead. You need your annual gas and electricity use in kWh, which you will find on a recent bill or annual statement, and the rates of any fixed deal you are offered.
For each tariff, fixed and variable, do this:
- Electricity cost = your annual electricity kWh multiplied by the unit rate, plus 365 multiplied by the daily standing charge.
- Gas cost = your annual gas kWh multiplied by the unit rate, plus 365 multiplied by the daily standing charge.
- Add the two together for the annual total.
Run the sum once with the cap rates above and once with the fixed deal's rates. The difference is your real saving or loss for this quarter's prices. Here is a worked example for a home using 2,700 kWh of electricity and 11,500 kWh of gas a year, comparing the July cap with a fix priced 5 per cent below it on units.
| Tariff | Electricity | Gas | Annual total |
|---|---|---|---|
| Variable (cap) | £913 | £949 | £1,862 |
| Fixed (5% below unit rates) | £877 | £907 | £1,784 |
Calculated at the Ofgem cap rates above (26.32p and 7.97p per kWh, standing charges 54.83p and 29.68p per day), 1 October to 31 December 2026. Fixed column applies a 5 per cent cut to unit rates only, as an illustration; check the actual rates of any deal you are offered.
Remember the variable column will change at the next cap review, while the fixed column stays put for the whole term. That is the whole point of the comparison. When you are ready to act, see our guide to switching suppliers.
Things a price comparison hides
The annual cost is not the only thing that decides which tariff suits you.
Exit fees. If a cheaper deal appears mid-contract, a fix can lock you out unless you pay to leave. Check the fee per fuel before you sign. Fee-free fixes give you the lock-in benefit without the trap.
Standing charges. Some fixes win on unit rates but quietly carry a higher daily standing charge, which hurts low users most. Always compare both numbers, not just the unit rate.
Your usage pattern. If you run an EV, a heat pump or storage heaters, a flat single-rate fix may be worse than a time-of-use deal. A cheap overnight rate can beat any standard fix for those households. Look at time-of-use tariffs and Economy 7 and night rates before you assume single-rate is the answer.
Smart meter requirements. Many of the keenest tariffs, especially time-of-use ones, need a working smart meter. Our guide to smart meters covers what that involves.
Your appetite for risk. A fix is insurance. If a stable, predictable rate would stop you worrying every quarter, that peace of mind has a value even when the pure pounds are close.
The bottom line
There is no tariff that is always cheaper. Fixing wins when you lock a rate below the cap and the cap then rises. Staying variable wins when fixes are pricey and the cap then falls. You cannot know the future, so judge the deal in front of you against today's cap, using your own kWh figures, not the advertised average.
A sensible rule of thumb: if you can fix at or below the current cap with a low or zero exit fee, fixing is a reasonable bet, because the downside is small and the protection against a future rise is real. If every fix on offer sits well above the cap, the market is not expecting big rises and you may be better staying variable and reviewing again at the next cap change. Either way, do the sum yourself, check the exit fee, and revisit the decision each time the cap moves.