The 0% VAT rate on domestic electricity, introduced by Andy Burnham on October 1, will remain in place until July after Chancellor John Healey confirmed the extension in his Autumn Budget.
The cut, which reduced the rate from 5% to 0%, has lowered the cost of charging electric vehicles at home. It was originally expected to end at the close of the financial year in April.
Home charging costs fall further
Matt Galvin, managing director of Polestar UK, said the update means motorists charging at home can continue to benefit from cheap rates, with those on an off-peak smart tariff paying just 2.3p per mile.
Galvin said: “Extending the VAT cut on household electricity is good news for drivers who can charge at home, keeping costs to around 7p a mile on a standard tariff and as little as 2.3p off-peak.”
Public charging still faces 20% VAT
However, Healey did not address the so-called “driveway divide”, with motorists charging in public still paying 20% VAT. Public charging can cost up to 50p per kWh, which could make EV ownership unaffordable for many.
Andersen EV previously warned that ordinary EV owners could save around £20 per year with the VAT cut, while high-mileage drivers could save £40 per year.
Planning hurdles remain for some drivers
Previous analysis has suggested that as many as nine million households in the UK do not have off-street parking. Although Labour has relaxed planning permission rules for cross-pavement solutions, motorists still need to secure local permission, and those in conservation areas will still need formal planning permission to install cables.
Many in the motoring industry had called for a reduction in public VAT rates to bring the two rates into line, but Healey did not introduce this on Wednesday.
Galvin added: “For the one in three drivers without a driveway, this Budget is yet another missed opportunity. They are still paying 20% VAT at public chargers, while those charging at home currently pay nothing. Instead of setting out a plan to end this driveway discrimination, the Chancellor is legislating to lock it in.”
