UK plans home electricity VAT cut as grid costs remain unknown

The government plans to remove the 5% value-added tax on household electricity for six months from October 1, a change that will lower the cost of charging electric vehicles at home but leave public charging subject to a 20% rate. Separately, new draft guidance would ask Ofgem to give greater weight to British jobs and manufacturing in electricity grid contracts, with ministers acknowledging a possible short-term cost tradeoff but not estimating its effect on bills. The VAT change is due to apply automatically to existing fixed tariffs as well as other household electricity bills, according to the government’s announcement. The reports describe it as planned, not yet in force. Public charging is not included in the reduction, leaving drivers who rely on public charge points paying the higher VAT rate. Carwow estimates that a rapid public charge for a 100kWh battery could cost as much as £81. For a vehicle with a 500-mile range, that works out to 16.2p per mile. By contrast, a home-charging example using Octopus Energy’s Intelligent Octopus Go tariff puts the cost at 1.6p per mile before the change, assuming an 8p-per-kilowatt-hour overnight rate and the same battery and range.