Scots will be able to claim £400 grants towards their rising energy bills as Rishi Sunak has backtracked plans for people to pay back.
The Chancellor has bumped the payment from £200 to £400 and those who receive the payments will no longer be required to pay them back.
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This is part of a UK wide package to help those struggling in the cost of living crisis.
Along with the energy support Sunak has said that some households will also be entitled to a £650 payment which will be provided to eight million households on means-tested benefits.
Later in the year pensioner households will get also receive a £300 one-off payment and disabled people will get a £150 payment.
In a major U-turn these measures will be funded by a 25% windfall tax on profits made by oil and gas giants.
Sunak said that these oil companies were making large profits partially due to the war in Ukraine.
He said he was "sympathetic to the argument to tax those profits fairly" and announced a "temporary targeted energy profits levy" which will be phased out when oil and gas prices return to normal levels.
Mr Sunak said the plan would include a “new investment allowance” to incentivise the reinvestment of profits by fossil fuel giants.
Ofgem’s chief executive Jonathan Brearly previously warned that the energy price cap would increase significantly to £2,800 in October.
Energy firms have already been able to raise charges on default tariffs by an average of £693 since April.
Shadow Chancellor Rachel Reeves said Mr Sunak had finally woken up to the pressures facing families - and said Labour was "winning the battle of ideas in Britain".
"Today, it feels like the Chancellor has finally realised the problems the country are facing," she said.
"We first called for a windfall tax on oil and gas producers nearly five months ago to help struggling families and pensioners. Today, he has announced that policy but he can't dare say the words: it's a policy that dare not speak its name with this Chancellor."
She said it had taken the Government too long to realise that Mr Sunak's "buy now, pay later compulsory loan scheme" was unfair.
"It shouldn't have taken a rocket scientist to work out that this wouldn't cut and we pointed it out at the time," she said.
It comes after Ofgem's chief executive Jonathan Brearley warned that the energy price cap on household bills was likely to increase to an eye-watering £2,800 in October.
The maximum amount firms can charge people on default tariffs has already risen by an average of £693 since April.
Mr Sunak told MPs: "This government will never sit idly by whilst there is a risk that some people in our country might be set so far back they might never recover.
IFS director Paul Johnson tweeted: "Big, expensive package from Rishi Sunak.
"In conjunction with tax rises already in place this is hugely redistributive - taking from high earners and giving to the poor.
"Promise to increase benefits and pensions by September inflation next April. Likely to be 10% or more. As expected. Big cash increase in spending."
Dame Clare Moriarty, Chief Executive of Citizens Advice, said: "Today’s hugely welcome announcement is a life raft for the millions of people struggling to keep their heads above water due to rising costs."
