The temporary VAT cut on electricity, first announced in July and effective from October 1, has been extended for another six months until July 1, reducing the cost of charging an electric car at home to as little as 1.52p per mile, with or without a driveway.
Chancellor John Healey confirmed the extension in the recent Budget, building on the earlier decision to remove the 5% VAT from electricity bills from October 1 as part of efforts to address the cost of living crisis. The move applies automatically to existing fixed tariffs, not just households on the standard price cap or those taking new deals.
Octopus Energy Passes on Savings
Octopus Energy has updated its cheapest and most popular EV tariff to reflect the VAT cut, reducing its Intelligent Octopus Go rate from 8p to 7.6p per kWh. Drivers on this tariff can charge their vehicles at night between 11.30pm and 5.30am at that rate.
For an EV with a 100kWh battery, a full charge costs £7.60. With a range of 500 miles, that works out to exactly 1.52p per mile. The Express reported in July that the VAT cut would reduce tariff costs to 1.52p per mile if Octopus passed on the savings, which it has now done.
Support for Drivers Without Driveways
Last month, the government relaxed rules for drivers without off-street parking. Drivers no longer need planning permission to install cross-pavement charging solutions, though installations still require local council approval and must run from the house to the car, which is not possible for many households.
The Department for Transport confirmed that households without driveways can access these rates, stating: "This will save drivers up to £300 on installation and open up home charging for as little as 2p per mile." The department added that cross-pavement charging helps residents access savings of up to £1,750 on running costs.
The Department for Energy Security and Net Zero announced: "On October 1, we removed VAT from household electricity bills, saving households an average of £45 a year. We're extending that VAT cut until July 2027 to continue giving breathing space to households on their bills."
Public Charging Costs Remain Higher
Drivers who rely on public charging continue to pay 20% VAT, unlike those charging at home. To address this, the Treasury announced £100 million in funding over two years, from spring next year, to cut costs at local, lower-powered EV chargers typically found on residential streets. This funding covers about a third of the current charging network and is expected to save drivers around £150 per year on average.
There are currently more than 124,000 public charge points for EVs in the UK, according to charger locator service Zapmap. Motoring organisations have argued that cutting VAT for on-street public EV chargers would be another way to help drivers with costs.
Vicky Edmonds, chief executive of EVA England, welcomed the funding announcement and said: "Equalisation of VAT between domestic and public charging would have been another welcome interim measure and it is disappointing that we still see no movement from Government on that." A Department for Transport spokesperson said: "We also want to make it even easier and more affordable for everyone to switch to an EV. That is why we're reviewing the cost of public charging, funding over 100,000 more public charge points, and providing £25 million to help residents without driveways charge at home and benefit from cheaper rates."
