Andy Burnham, the UK’s new Prime Minister, has cut VAT on domestic electricity from 5% to 0% from 1 October 2026. The change saves the average household about £45 a year, with extra savings for anyone who charges an electric car at home.
What The Policy Actually Does
Burnham announced the VAT cut on his second day in office, calling it a way to give people breathing space on the cost of living. The rate of VAT on household electricity bills drops from 5% to 0%, starting on 1 October 2026. Carwow
The cut applies to domestic electricity supplies only. Business energy accounts and public EV charging points are not included, so the tax reduction is aimed squarely at household bills. Fleet News
How Much Households Will Save
The government estimates the average household will save around £45 a year once the VAT cut takes effect. Ministers say this saving comes on top of an earlier £150 reduction already announced for household energy bills. Carwow
For most homes, the saving will show up automatically on electricity bills from October, since suppliers apply VAT at the point of billing. No application or extra step is needed from customers. El-Balad
Why EV Drivers Benefit More
Households that charge an electric car at home use far more electricity than an average home, so the VAT cut delivers a bigger cash saving for them. The government has confirmed the change will make home charging cheaper on top of the standard household saving. IBTimes UK
Under the Ofgem price cap for July to September 2026, domestic electricity costs 26.11p per kWh including VAT, meaning a full charge of a 100kWh electric car costs around £26.11 at home. Removing VAT lowers that cost further once the new rate applies. Carwow
Drivers on cheaper overnight EV tariffs stand to gain the most. Some electric car owners on tariffs charging as little as 8p per kWh overnight can already charge their car for close to 1.5p per mile, and the VAT cut trims this figure even further. AOL
Home Charging Versus Public Charging Costs
Public charge points are not covered by the VAT cut and will continue to carry VAT at 20%. This keeps a wide cost gap between charging at home and charging in public.
| Charging Type | VAT Rate | Change From 1 October 2026 |
|---|---|---|
| Home electricity (domestic supply) | 5% to 0% | VAT removed |
| Public EV charging points | 20% | No change |
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How The Government Is Paying For It
Ministers say the VAT cut will be funded by redirecting money set aside for the previous government’s planned Digital ID card scheme. Business Secretary Jonathan Reynolds described the move as a straightforward switch of spending. El-Balad
Chancellor John Healey said the tax cut is designed to ease pressure on household budgets and help bring down inflation this winter, alongside the wider goal of cutting living costs. Electrifying.com
What Happens After March 2027
The funding for the VAT cut is only confirmed until the end of the current financial year, in March 2027. Any decision to continue the cut beyond that date would need to be confirmed in a future Budget. El-Balad
Why Northern Ireland Is Treated Differently
Northern Ireland cannot receive the same VAT cut directly because EU rules limit which goods and services can be sold there without VAT. The government says it will instead provide equivalent funding to Northern Ireland to match the value of the cut. El-Balad
Criticism Of The Policy
Opposition politicians have questioned how the policy is funded. Shadow Chancellor Mel Stride argued that savings from cutting the Digital ID scheme are not genuine, since the money had never actually been allocated to it. El-Balad
Reform UK’s Eleanor Jackson dismissed the policy as a headline without real substance, arguing that cutting green levies and boosting domestic energy production would do more to lower bills. IBTimes UK
Electric Vehicles UK chief executive Tanya Sinclair said the policy deepens one of the biggest inequalities in the UK’s shift to electric vehicles, since millions of drivers without a driveway have no choice but to pay the higher public charging rate. AOL
FAQ: Andy Burnham Home EV VAT Cut
Q: What is the Andy Burnham home EV VAT cut?
electricity bills, from 5% to 0%, announced by Prime Minister Andy Burnham on his second day in office. It applies to home electricity supplies, which include home EV charging.
Q: When does the VAT cut start?
The new 0% rate takes effect from 1 October 2026.
Q: How much will households save?
The government estimates an average saving of about £45 a year on household electricity bills.
Q: Do I need to apply for the saving?
No. The lower VAT rate is applied automatically by energy suppliers on bills from October, so no application is needed.
Q: Does the VAT cut apply to public EV charging points?
No. Public charging points stay at the current 20% VAT rate. Only home electricity supplies benefit from the cut.
Q: How much cheaper will home EV charging become?
Under the current Ofgem price cap, a full charge of a 100kWh electric car at home costs around £26.11 including VAT. Removing VAT lowers this cost further. Drivers on cheap overnight tariffs can already charge for close to 1.5p per mile, and the VAT cut reduces this figure even more.
Q: How is the VAT cut being paid for?
Ministers say it is funded by reallocating money that had been set aside for the previous government’s planned Digital ID card scheme.
Q: Is the VAT cut permanent?
The funding is only confirmed until the end of the current financial year, in March 2027. Whether it continues beyond that would need to be confirmed in a future Budget.
Q: Does this apply in Northern Ireland?
Not directly. EU rules limit which VAT changes can apply in Northern Ireland, so the government will instead give Northern Ireland equivalent funding to match the value of the cut.
Q: Why are some people criticising the policy?
Opposition politicians have questioned the funding claims, and some EV industry figures say the cut widens the gap between cheaper home charging and more expensive public charging, since not all drivers have access to a driveway or home charge point.
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