Andy Burnham’s new VAT cut on electricity set to take effect from October could drive the cost of charging an electric car on your driveway down to as little as 1.52p per mile. In July, the new Prime Minister announced that VAT on electricity, currently set at 5%, is set to be removed from bills from October 1 in a bid to tackle the cost of living crisis.
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 between the hours of 11.30pm and 5.30am. And, despite the Ofgem price gap rising by 4% from October 1, the Octopus tariff is still set at 8p.
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.
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Andy Burnham’s VAT plan could help EV drivers at home (Image: Getty)
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.
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.
Car selling website Car Wow explains: “Electricity providers don’t always charge the maximum under the price gap, 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.”
But critics have already hit out at the new Prime Minister’s VAT changes, arguing that it increases the gap between cheap charging at home and expensive public charging even further.
VAT on domestic electricity will be cut from 5% to 0% from October 1 for six months, which was Andy Burnham’s first significant policy announcement as Prime Minister in July.
This will benefit drivers who charge their EVs at home, whereas those who rely on public charging – typically those without off-road parking where they live – will continue to pay 20% VAT.
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 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.”
Andy Burnham hands 1.52p per mile charges to households with driveways from October
A major electricity tax change coming into force in October could make charging an electric vehicle at home considerably cheaper for households with driveways.
The change, announced by Prime Minister Andy Burnham in July, removes VAT from domestic electricity bills from October 1, reducing the rate from 5% to zero for a temporary period. The government says the measure is designed to give households some breathing space as energy costs remain under pressure.
For electric vehicle drivers who can charge at home, the policy could have an additional effect. Some of the cheapest overnight EV tariffs can already bring the cost of driving down to around 1.6p per mile, according to calculations reported by the motor industry. With the VAT reduction passed through to customers, that figure could fall to approximately 1.52p per mile in a particular tariff example.
The figure is therefore not a new mileage charge imposed on households with driveways. It represents an estimated electricity cost for travelling one mile in an electric car when charging at home.
That distinction is important because the headline could otherwise suggest that households are being asked to pay 1.52p for every mile driven.
What is changing on October 1?
The government’s electricity VAT change is straightforward.
From October 1, 2026, VAT will be removed from household electricity bills. The existing rate is 5%, while gas will continue to attract VAT at 5%. The measure is currently funded through the 2026-27 financial year.
The government estimates that the electricity VAT cut will save the average household around £45 a year.
It will apply automatically, meaning households do not have to apply for a rebate or contact their energy supplier.
The change also applies to customers on fixed electricity tariffs. Suppliers are expected to pass the VAT reduction through to customers rather than retaining the difference.
For households that use relatively large amounts of electricity, the saving could be greater than for households with low electricity consumption.
This becomes particularly relevant for EV owners.
Charging an electric vehicle can add a significant amount to household electricity consumption, depending on the size of the battery, mileage driven and charging frequency.
Why driveways matter
The financial difference comes from where an EV is charged.
A homeowner with a driveway, garage or other private parking space can normally install a home charging point and use domestic electricity to charge their vehicle.
Someone living in a flat, terraced property or street without suitable off-road parking may have to rely on public charging infrastructure.
The VAT treatment of those two situations is different.
Domestic electricity will have VAT removed from October, while public EV charging remains subject to the standard 20% VAT rate.
That creates a significant difference between the two charging environments.
The government has therefore been criticised by parts of the EV industry for creating a larger gap between drivers who can charge at home and those who cannot.
Electric vehicle campaigners have argued that people without driveways may face higher charging costs through no choice of their own.
How could charging reach 1.52p per mile?
The 1.52p figure comes from a specific example rather than a universal cost.
One reported calculation uses an EV tariff offering electricity at around 8p per kWh during certain overnight hours. An electric vehicle with a 100kWh battery and a claimed range of 500 miles would use £8 worth of electricity for a full charge.
Dividing £8 by 500 miles produces a theoretical cost of 1.6p per mile.
If the 5% VAT currently applied to that domestic electricity were removed and the full saving passed through to the customer, the effective cost could fall to roughly 1.52p per mile.
But this should not be interpreted as a guaranteed price for every EV driver.
Real-world energy consumption varies significantly between vehicles.
Factors such as driving speed, temperature, road conditions, heating or air conditioning, battery efficiency and charging losses can all affect how many miles an EV achieves from a given amount of electricity.
Tariff prices also vary.
The 1.52p calculation is therefore best understood as an example illustrating how inexpensive home charging can become under a particularly cheap overnight tariff.
The bigger issue is the home-versus-public divide
The VAT change has reignited an existing debate over fairness in the UK’s transition to electric vehicles.
People with driveways can potentially benefit from three advantages.
First, they can charge at home.
Second, they can choose electricity tariffs specifically designed for EV charging.
Third, from October they will no longer pay VAT on the domestic electricity used to charge their vehicles.
Drivers without private parking may face a very different situation.
They may have to use public chargers, where electricity remains subject to 20% VAT.
Public charging prices can also include infrastructure, land, maintenance and network costs that do not apply in the same way to domestic electricity.
This means the headline difference between domestic and public charging is not solely caused by VAT.
Nevertheless, the removal of domestic VAT increases the tax difference between the two systems.
Industry warnings
Some representatives of the EV sector have criticised the policy on precisely these grounds.
Electric Vehicles UK chief executive Tanya Sinclair argued that the measure could reinforce an existing inequality because households without off-street parking are more dependent on public charging.
The RAC has similarly called for consideration of VAT reductions on public EV charging to narrow the difference.
These arguments are based on a practical concern: if the government wants more motorists to move from petrol and diesel vehicles to electric cars, charging needs to be affordable and accessible regardless of housing type.
The driveway issue is particularly important in densely populated urban areas, where many residents park on the street.
The government says households will benefit
The government has presented the VAT change primarily as a cost-of-living measure rather than an EV-specific subsidy.
Its official announcement says the measure is intended to reduce household electricity bills and support families facing higher living costs. It estimates the policy will reduce the annual Ofgem price-cap figure by approximately £45.
The government also says the measure will help limit inflation.
According to the Treasury and Department for Energy Security and Net Zero, removing VAT from electricity is estimated to reduce CPI inflation by approximately 0.10 percentage points and RPI inflation by approximately 0.14 percentage points.
That means EV charging is only one consequence of the policy.
Every household using domestic electricity can benefit, regardless of whether it owns an electric vehicle.
It will not eliminate higher energy prices
There is another important qualification.
Ofgem’s price cap for October to December 2026 is increasing by 4% for a typical household paying by Direct Debit. The average annual figure rises to £1,723.
Electricity prices under the cap will average 26.32p per kWh, excluding VAT because VAT will be zero during the relevant period. Gas will average 7.97p per kWh and continue to include 5% VAT.
The VAT cut therefore does not mean that household energy prices are simply falling across the board.
Wholesale energy costs and other components of the price cap continue to influence bills.
Ofgem has specifically warned that the change in VAT makes direct comparisons with previous price-cap periods more complicated.
The six-month question
The VAT cut is also temporary under the current funding arrangement.
The government says the measure is funded for the 2026-27 financial year. The change is scheduled to apply from October 1, 2026, through March 31, 2027.
That means households should not automatically assume that the zero-VAT rate will continue indefinitely.
The government has said further decisions about longer-term measures will be considered at the Budget alongside an Office for Budget Responsibility forecast.
For EV owners, this creates another consideration.
A particularly cheap home-charging calculation based on zero VAT could change again if the tax rate returns to 5% after March.
What does it mean for EV drivers?
For an EV owner with a driveway, the change could provide a noticeable reduction in charging costs, particularly if they are able to access an inexpensive overnight tariff.
For example, someone charging at 8p per kWh could already be paying substantially less than the rates available at many public rapid-charging locations.
Removing VAT makes the domestic electricity even cheaper.
However, drivers should not assume that every home charger will suddenly cost 1.52p per mile.
The actual cost depends on the electricity tariff, the vehicle’s efficiency and the distance achieved from each kWh.
A car that consumes more electricity per mile will cost more to operate than a highly efficient EV.
The same applies to drivers who cannot access cheap overnight tariffs.
What about people without driveways?
This is arguably the most controversial aspect of the policy.
The October change gives a direct tax advantage to domestic electricity users, but public charging is treated differently.
A driver living in a house with a driveway can potentially plug into a home charger overnight.
A driver living in a property without private parking may have no practical alternative to public infrastructure.
That difference is not necessarily created by the VAT policy itself, because home and public charging have long had different tax arrangements.
But eliminating domestic VAT widens the gap.
This is why industry groups have called for a more consistent VAT treatment across charging locations.
A policy with wider consequences
Burnham’s electricity VAT cut is therefore more complicated than the headline about “1.52p per mile” suggests.
It is fundamentally a temporary tax reduction on household electricity.
The direct benefit is lower electricity costs for households, with the government estimating an average saving of around £45 per year.
For EV owners who charge at home, the effect can be amplified because electricity is effectively the fuel used to power their vehicle.
Under certain low-cost tariffs, calculations suggest the cost of driving could fall to around 1.52p per mile.
But that is an example, not a government-set mileage rate.
There is no new 1.52p-per-mile charge for households with driveways.
Instead, the October policy could make home charging cheaper while leaving public charging subject to 20% VAT.
That creates a clear debate about whether Britain’s transition to electric vehicles is equally accessible to households with different types of housing and parking.
For now, the practical change is clear: from October 1, domestic electricity VAT falls from 5% to zero, and the saving will be applied automatically to eligible household electricity bills.
For EV drivers with access to a driveway, the policy could make an already inexpensive way of fuelling a car even cheaper.
For those without private parking, however, the gap with public charging remains an unresolved issue.