New Prime Minister Andy Burnham has slashed VAT rates on household electricity, delivering savings for electric vehicle drivers who charge at home. The policy, effective from October, is projected to save the average EV driver £17.64 per year based on typical annual mileage of 7,100 miles.
How the VAT Cut Works
The reduced VAT rate applies to domestic electricity used for all purposes, including EV charging. Based on the current July-to-September price cap of 26.11 pence per kilowatt-hour, a Tesla Model Y driver would save approximately 78 pence per full charge. Over a year, this translates to cumulative savings of £17.64, according to AutoExpress calculations.
Vicky Edmonds, CEO of EV advocacy group EVA England, welcomed the move: “Cutting VAT on household energy bills is welcome news. For EV drivers who charge at home, it will make cars that can already save them thousands of pounds even cheaper to run.”
Inequality for Public Charger Users
However, the policy has drawn criticism for excluding millions of EV owners without driveways who rely on public charging stations. These drivers continue to pay 20% VAT on electricity, creating a two-tier system. Edmonds added: “But millions of EV drivers without a driveway will not fully benefit because they can't easily access home charging. The Government's Cost of Public Charging Review must now deliver real structural reform to bring down prices at the chargepoint.”
John Lewis, CEO of EV charging firm char.gy, highlighted the disparity: “Drivers who rely on public charging, often because they don't have a driveway, will still pay 20 per cent VAT for exactly the same electricity. If Government is serious about making the EV transition work for everyone, the next step has to be equalising VAT on public charging. The electricity is the same. The tax treatment should be too.”
Government Response
A Treasury spokesperson defended the policy, stating: “Whilst domestic electricity VAT reliefs were not designed or introduced for charging EVs at home, the VAT relief applies for all uses of domestic energy, as it is not possible for energy companies to distinguish between electricity used to charge an EV and electricity used for general domestic purposes.”
The VAT cut is part of Burnham's broader agenda to support green energy and reduce living costs, but critics argue it inadvertently penalises those without off-street parking.
