Change the encoding of a file in Visual Studio Code

Apart from the settings explained in the answer by @DarkNeuron:

"files.encoding": "any encoding"

you can also specify settings for a specific language like so:

"[language id]": {
  "files.encoding": "any encoding"

For example, I use this when I need to edit PowerShell files previously created with ISE (which are created in ANSI format):

"[powershell]": {
    "files.encoding": "windows1252"

You can get a list of identifiers of well-known languages here.

So here's how to do that:

In the bottom bar of VSCode, you'll see the label UTF-8. Click it. A popup opens. Click Save with encoding. You can now pick a new encoding for that file.

Alternatively, you can change the setting globally in Workspace/User settings using the setting "files.encoding": "utf8". If using the graphical settings page in VSCode, simply search for encoding. Do note however that this only applies to newly created files.