Newly appointed Prime Minister of the UK, Andy Burnham, has announced that Value-added Tax (VAT) on domestic electricity will be wiped entirely from 5% to zero. The measure is set to come into place on the 1st of October, and will give homeowners across the UK some relief on their electricity bills – particularly those who are currently charging their electric vehicle at home. The VAT relief is set to run for six months, until the start of April.
When it comes to how much this could actually save EV drivers, we’ve run the numbers based on a driver covering 8,000 miles a year, half of which falls within the six-month VAT break, undertaking all their charging sessions at home. Assuming their EV has an efficiency of 3.5 miles per kWh and a home electricity rate of 26.11p per kWh, cut to 24.87p per kWh once VAT is removed, the saving works out at around £14 over the six months.
It’s still early days for Burnham’s tenure, but we’re yet to hear whether changes will be made to the VAT on public charging, which currently stands at 20%. Without any changes, this move will widen the price gap between public and domestic charging for six months, despite voices across the industry already asking for the price gap to be narrowed, primarily through calling for VAT on public charging to be cut to 5% in line with domestic electricity. A tribunal ruled earlier this year that public charging VAT should be in line with domestic charging – however, the HMRC is currently challenging this decision.
Burnham’s appointment also raises questions over the future of other planned EV taxation measures, including the pay-per-mile scheme (eVED), previously due to take effect in 2028. Whether this proceeds under the new cabinet, or is reconsidered in favour of alternative ways to replace constantly falling fuel duty revenue as more drivers make the switch to EVs, remains to be seen.
The industry reacts
Michael Braybrook, Managing Director UK at Zaptec, commented:
“Cutting VAT on household electricity is a practical way to give people some relief on bills. For EV drivers who can charge at home, it also makes one of the biggest advantages of electric driving even stronger. The real opportunity is to pair lower electricity costs with smart charging: charging when demand is lower and tariffs are cheaper. That helps drivers spend less, while helping the grid handle more electric vehicles without unnecessary pressure at peak times. This is a useful step. The long-term job is to make clean electricity affordable, flexible and easy to use, and by making EVs more affordable, it helps accelerate the UK’s shift towards cleaner transport and a lower-carbon future.”
