The Government’s decision to remove VAT on household electricity bills from October is set to lower running costs for electric vehicle drivers who charge at home, although industry leaders warn it exposes a deep financial divide for motorists without driveways.

In one of his first acts as Prime Minister, Andy Burnham has announced that the Government will remove VAT on household electricity bills from October.

The tax cut will be funded from the cancelled Digital ID programme and will give people some breathing space and help with the cost of living, according to Burnham.

Michael Braybrook, managing director UK at smart charging manufacturer Zaptec, said cutting VAT on household electricity was a practical way to give people some relief on bills. For EV drivers who can charge at home, it also makes one of the biggest advantages of electric driving even stronger.

Braybrook added: “The real opportunity is to pair lower electricity costs with smart charging: charging when demand is lower and tariffs are cheaper. That helps drivers spend less, while helping the grid handle more electric vehicles without unnecessary pressure at peak times.

“This is a useful step. The long-term job is to make clean electricity affordable, flexible and easy to use, and by making EVs more affordable, it helps accelerate the UK’s shift towards cleaner transport and a lower-carbon future.”

Meanwhile, David Martell, CEO of Andersen EV, said removing VAT from household electricity from October would be a welcome, practical measure that benefits millions of households, while strengthening one of the biggest financial advantages of owning an electric vehicle.

“For the average EV driver charging at home, the saving on charging alone is likely to be around £20-£25 per year at standard domestic electricity rates. For higher-mileage drivers, it could be closer to £35-£40. That may not sound transformational on its own, but it’s the direction of travel that matters. It demonstrates a willingness to support the transition with practical measures that make a real difference to consumers. The low cost of charging at home – made more compelling by smart tariffs – is already one of the strongest reasons for making the switch to electrified mobility. Many EV drivers are charging overnight for a fraction of the cost of filling up a petrol or diesel car. Reducing household electricity costs only strengthens that advantage and will gives more consumers greater confidence to make the change.”

And Octopus Electric Vehicles said it was yet another boost for EV affordability. Sam Gurjeet Grewal, CEO of the EV leasing firm, commented: “Cutting VAT on electricity bills makes one of the UK’s cheapest forms of transport even more affordable. Drivers will now save close to £900 a year by charging an EV at home instead of filling up a petrol car – that’s enough to cover an annual insurance bill for many drivers.

“With electric cars now reaching price parity across more models – and the UK’s cheapest new car, the Dacia Spring, now electric – the financial case for going electric has never been stronger.”

However, electric vehicle advocacy groups warn that the policy creates a two-tier system for the nation’s drivers.

Vicky Edmonds, chief executive officer of EVA England, welcomed the household tax relief but pointed out that millions of drivers without a driveway will not fully benefit because they can’t easily access home charging.

Because public charging points do not benefit from this domestic VAT removal, these drivers are excluded from the direct savings, making the transition inherently unfair for those forced to pay substantially more simply due to their housing situation.

Edmonds elaborated: “The Government’s Cost of Public Charging Review must now deliver real structural reform to bring down prices at the charge point. That means tackling the significant taxes, levies and electricity costs faced by charge point operators and ensuring savings are passed directly on to drivers. The transition cannot be fair while people pay substantially more simply because they cannot charge at home.”