Andy Burnham, the new Labour Party Prime Minister, has confirmed a change to electricity taxation that will see a 5% VAT rate applied to household electricity bills, reducing the amount households pay by approximately 4.8% from October. The move is expected to benefit electric vehicle (EV) owners who charge at home, with savings of around £1.24 per full charge for a 100kWh battery, according to Carwow.
Details of the VAT reduction
The cut will take effect from October, meaning households should see the lower tax reflected automatically in their electricity bills. Based on today's capped rate, a full charge for a 100kWh battery would fall from £26.11 to around £24.87, saving approximately £1.24 per full charge. Carwow reports that charging an EV at home generally costs between 7.5p per mile, which would be reduced to around 7.2p under the VAT cut.
Energy suppliers and implementation
The Labour government says it expects all energy suppliers to pass the VAT reduction on to customers, including those on fixed tariffs. Money Saving Expert (MSE) has contacted 19 major UK energy suppliers to ask if they will pass on the reduction from 1 October. So far, ten firms have told MSE they will: 100 Green, British Gas, EDF, E.on Next, Fuse, Good Energy, Octopus, So Energy, Utilita, and Utility Warehouse.
Scope of the cut
MSE stated: "The cut will ONLY apply to electricity bills. This means those with dual fuel bills for gas and electricity will only see the reduction on the electricity they use." The cut applies to electricity bills in England, Scotland, and Wales, but will work differently in Northern Ireland. The Northern Ireland Executive will receive equivalent funding to support households in a similar way to the rest of the UK. MSE has asked the Executive for further details and will update when more information is available.
