Home EV charging price rises to be cancelled out by VAT cut, but relief won't last

It’s very much a case of ‘as you were’ for EV drivers, with Andy Burnham’s VAT cut for domestic electricity effectively cancelling an October rise in the Ofgem price cap that could have seen a significant rise in the cost of home charging. 

The energy price regulator has announced that its cap for domestic gas and electricity will increase by four per cent in October, due to high wholesale prices in light of the Iran War. For those not on a fixed energy tariff, this would have seen the cost of electricity, including home EV charging, rise by around one pence per kilowatt-hour. This translates to an extra 60p per charge of the average 60kWh electric car, such as the Tesla Model Y RWD.

However, the Prime Minister announced in July that he would make domestic electricity exempt from VAT between October 2026 and the end of March 2027 in an effort to “put more money in people’s pockets and bring back hope”. 

With VAT on domestic energy charged at a reduced rate of five per cent, this cut has effectively negated much of the rise in the price cap; the maximum suppliers can charge for electricity will go from 26.11 pence per kWh between 1 July and 30 September to 26.32 pence per kWh between 1 October and the end of 2026.

As such, only those on fixed energy tariffs will see tangible savings from Burnham’s VAT cut. But this might be short-lived as analysts believe that energy prices could rise by up to nine per cent in the new year. Norwich-based consultancy firm Cornwall Insights estimates that the standing charge cap for domestic electricity could rise to 55 pence per day, alongside a cost of 28.33 pence per unit of electricity. 

At this forecasted price cap, charging an aforementioned Model Y RWD would cost around 40 pence more than it does now, or the equivalent of almost £50 extra over the course of 10,000 miles.

How charging costs might change

Cornwall Insights’ principal consultant Dr Craig Lowrey said: “Households will see rising energy bills going into winter, with the risk that unfortunately January will bring even more hardship. Where January bills land will depend on whether the situation in the Middle East calms down in the next couple of months. 

“However, even if we saw an end to the conflict, lower stocks going into winter as demand increases mean falling bills in January is unlikely.”

Burnham says he and the Government will “continue to look at how we get energy prices down in the long term”. It’s possible that further support could be announced in the Autumn Budget, but this will likely depend on the situation in the Middle East and, as hinted by the PM, would potentially come at the cost of tax rises.

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