Home electricity VAT is going to 0%. For EV drivers, the real story is charging.
3 min read · 21 July 2026. From 1 October 2026, VAT on domestic electricity drops from 5% to 0%, announced by Prime Minister Andy Burnham on his first full day in office. The Government puts it at around £45 a year for a typical household. But an EV household is not a typical household, and the gap between charging at home and charging in public is about to get wider.
What was actually announced
On 21 July 2026 the Government confirmed that VAT on household electricity will be removed entirely from 1 October 2026, cut from the current 5% rate to zero. The measure is estimated to cost around £850 million in 2026-27 and is timed to land with the October Ofgem price cap. Small businesses that qualify for domestic energy VAT relief and are not VAT-registered, along with charities and residential care homes on the reduced rate, also benefit.
Two points of scope are worth being precise about, because both have been blurred in some of the coverage. The cut applies to electricity only, and the announcement does not mention gas. And the £45 figure is an average, calculated against the Ofgem price cap for typical consumption. It is not a promise about your bill.
An EV household benefits more than the headline number
That average is where this gets interesting for anyone running an electric car. A typical EV covering 8,000 to 10,000 miles a year draws roughly 2,000 to 2,500 kWh from the home supply. For many households that is a material addition to annual electricity consumption, often in the region of 70 to 90% on top of a typical home's usage.
The VAT cut applies to every one of those kilowatt-hours. So the more of your driving you fuel from your own driveway, the further above the £45 average your benefit sits. The saving scales with consumption, and EV households consume more.
The gap between home and public charging
Here is the detail largely missing from the coverage. Public charging is standard-rated at 20% VAT, and this announcement does not touch it.
From October, on HMRC's position, the identical kilowatt-hour is taxed at 0% at home and 20% at a motorway rapid charger, on top of the commercial premium public networks already charge. Home charging was already the foundation of the EV cost case. This widens that advantage.
One caveat worth knowing, because it is genuinely unresolved. In February 2026 the First-tier Tribunal ruled in Charge My Street that the reduced domestic rate should apply to public charging where supply does not exceed 1,000 kWh per customer per month at a given location. HMRC is appealing that decision and its stated position remains that standard-rate VAT applies to public charging infrastructure. So the 20% figure is what you pay today and what HMRC maintains is correct, but it is under live legal challenge. If the appeal fails, the public-charging rate could fall and the gap described above would narrow.
The practical takeaway for fleet and salary sacrifice decisions does not really change either way: the value of an EV scheme depends heavily on whether the driver can charge at home. A home charge point bundled into the same gross-salary deduction as the car is not an accessory. It is the piece that unlocks the cost case. And drivers without a driveway, disproportionately renters and city households, remain the ones penalised by the difference.
Where salary sacrifice stacks on top
For an employee in a salary sacrifice scheme, October's change is one layer of a stack: the car funded from gross pay at a 4% Benefit-in-Kind rate for 2026/27, the electricity that runs it at 0% VAT from October, and for those who go further, solar generation and battery storage that push the marginal cost of a home-charged mile lower again. Solar installations already carry 0% VAT; from October the grid electricity around them does too.
That is consistent with what we see in Perx calculator quotes, where users bundle the home-energy add-ons with the car rather than treating them as separate purchases.
See what it works out to
Every household and salary is different, which is why worked examples only go so far. The Perx home-energy calculator lets you configure the car, a home charge point, and solar or battery storage, and see an indicative net monthly figure: run your own numbers.
All figures are indicative. Nothing here is personal financial or tax advice, and the VAT treatment of public charging is subject to an ongoing appeal.
Frequently asked questions
Is there VAT on EV charging at home?
From 1 October 2026 the rate is 0%. Home electricity, including electricity used to charge an EV, moves from 5% VAT to 0% under the measure announced on 21 July 2026. Before that date it is 5%.
Why is public EV charging more expensive?
Public charging is standard-rated at 20% VAT on HMRC's position, plus the commercial costs of operating the network. Note that a February 2026 First-tier Tribunal decision found the reduced rate should apply below 1,000 kWh per customer per month at a location; HMRC is appealing, so this point is not settled.
Will the VAT cut make charging an EV cheaper?
Yes. From 1 October 2026 every kWh drawn from the home supply is taxed at 0% instead of 5%. The Government estimates around £45 a year for a typical household against the Ofgem cap; households charging an EV at home use more electricity, so their saving is larger.
Does the VAT cut apply to gas as well?
No. The announcement covers domestic electricity only. Gas is not mentioned in the measure.