The Prime Minister will update domestic VAT electricity rates from October 1, cutting the rate from 5% to 0%, a change overseen by Andy Burnham that will affect motorists with driveways across the UK.
The reduction in VAT will have a knock-on effect for electric car owners, with drivers expected to enjoy lower charging costs. According to analysis from New Automotive, EV owners using a dedicated charger on a standard tariff are the most affected and look set to save £27 per car per year.
Industry reaction to the VAT cut
The announcement is expected to provide a significant boost for EV drivers, as traditional petrol and diesel owners continue to grapple with rising costs. Speaking exclusively to The Express, Tanya Sinclair, CEO of Electric Vehicles UK, said: "Cutting VAT on household electricity makes driving electric even cheaper, with EV owners who charge at home saving up to £27 a year from the tax cut alone."
Robin Heap, CEO of EV charging firm Zest, also told The Express that Mr Burnham's VAT cut was set to be "good news for EV drivers with a driveway".
Savings vary by tariff type
According to New Automotive, as many as 797,000 electric cars are being charged on a standard tariff. Motorists who use a dedicated EV tariff to charge their vehicles will still make savings, though the reductions will be considerably more modest at just £13 per car per year.
New Automotive clarified that motorists on a dedicated off-peak EV tariff will save less owing to the relatively small amount of VAT that was available to be abolished. Nevertheless, these drivers account for the majority of owners, with as many as 934,000 electric car owners charging their vehicles in this manner.
Public charger users excluded
Data from New Automotive reveals that motorists using an alternative home charging method will also see their charging costs reduced. These drivers can expect to save £21 per car per year, representing another significant boost for hard-pressed road users.
However, the new changes will only reduce VAT rates on domestic electricity supply, meaning motorists who rely on public charging points will be unable to benefit. These drivers will instead continue to pay 20% VAT, with the divide between those with and without home driveways set to widen further.
