Andy Burnham's new VAT cut on electricity, effective from October 1, is set to reduce the cost of charging an electric car on a driveway to as little as 1.52p per mile. The Prime Minister announced in July that VAT on electricity, currently at 5%, would be removed from bills for six months to tackle the cost of living crisis.
How the savings work
EV drivers on the Intelligent Octopus Go tariff can currently charge at home for the equivalent of 1.6p per mile. Octopus offers an EV tariff of 8p per kWh at night between 11.30pm and 5.30am. Despite the Ofgem price cap rising by 4% from October 1, the Octopus tariff remains at 8p.
For an EV with a 100kWh battery, a full charge costs £8. With a range of 500 miles, that works out at 1.6p per mile. The removal of VAT could drop this to an estimated 1.52p per mile, should Octopus pass on the savings to customers on this fixed tariff.
Andy Burnham announced that the VAT cut will automatically apply to tariffs which are already fixed, not just for households on the standard price cap or those taking new deals.
Widening gap with public charging
Car selling website Carwow explains: "Electricity providers don't always charge the maximum under the price cap, especially for customers who switch to a tariff that's designed for EV drivers."
"These tend to bring significantly lower prices at night, and with most EVs (and many home wallboxes) being able to schedule charging sessions based on owner preferences, it is easy to take advantage of these off-peak prices."
Critics have argued that the VAT changes increase the gap between cheap home charging and expensive public charging. VAT on domestic electricity will be cut from 5% to 0% from October 1 for six months, benefiting drivers who charge at home, while those relying on public charging—typically without off-road parking—will continue to pay 20% VAT.
Industry reaction
EV lobby groups have long warned that the difference risks reducing the switch to electric motoring among lower income households. Tanya Sinclair, chief executive of Electric Vehicles UK, said the announcement "entrenches one of the biggest inequalities in the UK's EV transition".
She told the Press Association: "Millions of drivers without off-street parking have no choice but to pay 20% VAT when charging in public, while those with a driveway will now pay none at all."
"If this Labour Government is serious about a fair transition, it cannot ask EV drivers to pay different prices for the same electricity simply because of where they live."
Siobhan Doyle, consumer writer at Carwow, said eliminating VAT on domestic electricity "highlights the growing divide in EV ownership". She said: "If the Government wants to make electric vehicles truly accessible and fair for everyone, equalising public and home charging VAT remains the crucial missing piece of the puzzle."
RAC head of policy Simon Williams said: "We urge the new Prime Minister to give serious consideration to lowering VAT on public EV charging, so that those without driveways can make the switch to electric motoring more affordably."
