- UK Budget extends temporary VAT relief on domestic electricity
- £100 million of funding will support more residential public charge points
- Yet the future of the £3,750 Electric Car Grant remains unclear
Labour Party chancellor John Healey has announced his first budget statement under the recently-installed Prime Minister Andy Burnham — and while there was some welcome news for owners of internal combustion engine cars, chiefly in the form of a frozen fuel duty increase, EV owners arguably fared better.
Firstly, for anyone that can plug in their electric vehicle and charge at home, Healey confirmed that the temporary removal of VAT on domestic electricity will be extended until July 2027.
This means electric motorists won’t have to face the 5% increase until July 2027, making domestic charging by far and away the cheapest way to run any vehicle.
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Irritatingly, the faster and generally more convenient public charging network still adds an additional 20% VAT rate to the already astronomical prices, with no plans to relax these rules.
Thirdly, in an attempt to remove any barriers for those without at-home charging facilities, the government announced £100 million of funding available, split over two years, to install more lower-powered public charge points near homes.
The government says this will cover chargers typically found on residential streets, where drivers can leave their vehicles to charge for several hours or overnight.
What’s more, the government also recently announced that anyone thinking of installing a pavement gutter, which allows cables to be safely trailed from the house to an EV parked on the road, won’t have to apply for planning permission.
Not only is it a costly undertaking, but gaining planning permission can also be confusing and a painful time-drain due to the bureaucracy involved.
Pavement gutters or sidewalk trenches make it much easier for those living in busy residential areas or terraced streets, where driveway space is at a premium or non-existent, to charge from a wall-mounted outlet and take advantage of cheaper, off-peak energy tariffs.
However, with the good news comes the bad. Chancellor John Healey failed to address the future of the Electric Car Grant, which was first introduced by then-chancellor Rachel Reeve in July 2025 and reduces the cost of some new EVs by up to £3,750.
Although here, no news is arguably good news for the consumer, as it means the aforementioned savings are still very much up for grabs until further notice.
Analysis: The future is uncertain
Politicians have already made noises about introducing a pay-per-mile tax for EV owners in an attempt to make up for the losses in fuel duty, seeing as fewer motorists are visiting the pumps, as well as leveling the current Vehicle Excise Duty playing field, which is predominantly shouldered by those with petrol or diesel vehicles.
Snappily-titled the Electric Vehicle Excise Duty (or eVED for short), Chancellor John Healey confirmed that the tax is due to be introduced in 2028 and that the government is in the process of developing a new digital tool that will allow electric vehicle owners to opt in and have their annual mileage automatically recorded.
But critics are already calling for greater clarity. John Cassidy, Managing Director of Close Brothers Motor Finance, explained that his company’s research found that nearly half (49%) of EV drivers want the proposed charge delayed or scrapped, underlining the importance of explaining “how the policy will affect drivers’ costs”.
“Clear communication and long-term certainty will be crucial to maintaining consumer confidence,” he said.
So while it feels like the UK government is still on the side of promoting the transition to greater electrification in the transport sector, it hasn’t gone as far as to state how long for, with the likes of eVED suggesting that EV owners will have to get used to more taxation, an uncertainty around new car grants and potentially unchecked public charging network prices.
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Leon Poultney
