Andy Burnham's new VAT charging rules could see road users with a driveway pay £335 per year to use their vehicles. The new Prime Minister has introduced a cut on the price of domestic household electricity costs, reducing VAT rates from 5% to 0%.
Many electric car drivers pay the standard Ofgem Energy Price Cap to top-up their cars, including road users without a Smart Meter or dedicated EV tariff. Using data from AutoExpress as a guide, Express.co.uk has worked out that road users topping up a Tesla Model Y are set to pay £335.16 to top-up their batteries as part of the new VAT tweaks, a saving of £17.
Details of the savings
The Tesla Model Y, currently the UK's best-selling EV, has a 60 kWh usable battery. Charging a vehicle at 26.11p/kWh would mean road users should expect to pay £15.60 every time they top up their car. Over the course of a year and an average of 7,100 miles, road users would ordinarily have paid £352.80 per year if VAT was applied.
But without paying VAT, the per-charge cost to top up the Tesla would actually fall to £14.82. This would ensure road users are getting a 78p saving under the new plan. If the price cap costs were to stay the same over the whole year, road users would instead pay £335.16 to charge their vehicles.
Impact and funding
The news could be a major win for road users concerned about the rising cost of living and car ownership. However, the Ofgem Energy Price Cap is updated every three months, meaning that costs could rise or fall as early as September.
After the announcement, Chancellor of the Exchequer John Healey said: “For too long, too many people have struggled with the cost of living. Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.”
Officials explained that the new VAT electricity cut is expected to cost the Treasury £850 million in 2026-27. However, Mr Burnham explained that the policy is being funded through the cancellation of the UK’s Digital ID scheme which was set to cost £1.8 billion over the next three years.
