The maximum amount of cash motorists can claim towards the cost of a plug-in car has been cut from £2,500 to £1,500.
For cars to be eligible for the grant they must now cost less than £32,000.
This is down from £35,000.
The changes sparked an angry response from the automotive industry, but the DfT said they will allow “the scheme’s funding to go further and to help more people make the switch to an EV (electric vehicle)”.
It added that the Government’s investment in the transition to EVs “remains unchanged”.
The purchase of more than half a million low-emission vehicles has been supported by the plug-in grant scheme over the last decade.
Sales of zero-emission new cars are up 89% this year compared with 2020, and in the last three months nearly a quarter of new cars sold had a plug.
Maximum grants for electric motorcycles and mopeds was £1,500, but this has been cut to £500 for the former and £150 for the latter.
Large electric vans are now eligible for a grant of up to £5,000 – down from £6,000 – with the support for small vans falling from a maximum of £3,000 to £2,500.
The DfT also announced that it will introduce new rules next year aimed at increasing confidence in charging infrastructure.
Transport minister Trudy Harrison said: “The market is charging ahead in the switch to electric vehicles.
“This, together with the increasing choice of new vehicles and growing demand from customers, means that we are re-focusing our vehicle grants on the more affordable vehicles and reducing grant rates to allow more people to benefit, and enable taxpayers’ money to go further.
“We want as many people as possible to be able to make the switch to an electric vehicle, which is why we will also be introducing new rules to make it easier to find and pay at charge points.
“This will ensure drivers have confidence in our charging infrastructure, as we look to reduce our carbon emissions, create green jobs and level up right across the UK.”
Sales of new petrol and diesel cars and vans in the UK will be banned from 2030.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders said: “Slashing the grants for electric vehicles once again is a blow to customers looking to make the switch and couldn’t come at a worse time, with inflation at a 10-year high and pandemic-related economic uncertainty looming large.”
He added that other countries are “doubling down on incentives”, while UK drivers “risk being left behind on the transition to zero-emission motoring”.
Jim Holder, editorial director of magazine and website What Car?, accused the Government of “sending out mixed messages” saying “It wants to promote environmentally-friendly transport, yet it is reducing the incentive to do so at a time when electric cars are still more expensive to buy and represent a minority in the new car market.”
RAC head of roads policy Nicholas Lyes said the “disappointing cut” means that only around 20 EV models are now eligible for the grant.
That “doesn’t leave a great deal of choice for consumers”