Andy Burnham announced a major VAT cut for electricity – but there is a catch (Image: Getty)
A major change for people who use their driveway to charge an electric vehicle has been announced – but a BBC finance expert has highlighted a major issue. From October 1 electricity bills will be VAT free, saving households around £45-a-year the Government said.
The move will be funded in part by scrapping Sir Keir Starmer’s digital ID project, which had been estimated to cost around £600 million-a-year over three years. It would mean that people charging their electric vehicles on their driveway would find it is even cheaper.
EV drivers can currently charge their cars on the driveway for as little as the equivalent of 1.6p per mile if they are on cheap EV tariff Intelligent Octopus Go. Octopus’ EV tariff allows drivers to charge their car from 8p per kWh at night. For an EV with a 100kWh battery, it would cost £8 to charge. With a range of 500 miles, that makes 1.6p per mile.
But the removal of VAT from electricity could drop this as low as an estimated 1.52p per mile, should Octopus pass on the VAT savings to customers fixed to this tariff.
However Paul Lewis from BBC Radio 4’s Money Box program explained on X that in fact the cut might not be so generous – and also that the £45 a year figure is ‘exaggerated’. And he explained that the plan which starts on October 1 is in fact only set up and funded to last 6 months – although the quoted savings are for 12 months.
He said: “It gets sillier. The VAT cut is only scheduled to last (and costed) for six months, though it will be hard to put back once taken away. But the much quoted (and exaggerated) £45 saving is over a year! In fact as promised and paid for it will in fact only last for six months
“Put another way, scrapping 5% VAT on domestic electricity bills cutting prices by 4.76% will knock about £10 a year off the standing charge and about 1.25p off each unit of electricity used. Boiling a kettle 3x a day for a year may save users maybe £3.64 a year (probably less).”
Tanya Sinclair, chief executive of Electric Vehicles UK, said the new Prime Minister’s 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.”
EV owners were given a boost earlier this year. People who are being put off switching to an electric vehicle (EV) because they lack a driveway were targeted in a rule change that kicked in from, April 2026. Renters and flat owners can apply, for a grant which was uplifted from £350 to £500.
It gets sillier. The VAT cut is only scheduled to last (and costed) for six months, though it will be hard to put back once taken away. But the much quoted (and exaggerated) £45 saving is over a year! In fact as promised and paid for it will in fact only last for six months https://t.co/AWkMp3Xw2l
— Paul Lewis (@paullewismoney) July 21, 2026
The Government said it would typically cover half the cost of having an EV charger installed at home. For people without a driveway, it will go towards the cost of an alternative solution, such as cross-pavement chargers. Renters, flat owners, landlords, homeowners without driveways and businesses are all eligible.
Keir Mather, the minister for decarbonisation, told BBC Radio 4’s You and Yours programme at the end of February, when the changes were first announced: “We think it will make a big difference. We are working as hard as possible so that as many people as possible can make the switch to an electric vehicle, but we can only do that if we make it cost-effective to charge from home.
“So by uplifting this grant from £350 to 500, that’s going to cover almost half the cost of the typical install of a charge point, about 42% of the cost. But the important point is installing those charge points unlocks those massive cost savings that you can get through home charging of around 2p a mile.
“So that’s the equivalent of driving from London to Birmingham for about £3.50. We want as many people as possible to be able to access that, and that’s why we’re extending the grant today.”
