The plug-in car grant will be reduced from £3,000 to £2,500 and restricted to cars under £35,000.
The government says this move will allow the scheme’s funding to go further and help more people make the electric switch.
Electric car sales increased rapidly over the past year, but are still a relatively small proportion of all cars sold.
Transport minister Rachel Maclean said: “The increasing choice of new vehicles, growing demand from customers and rapidly rising number of chargepoints mean that, while the level of funding remains as high as ever, given soaring demand, we are refocusing our vehicle grants on the more affordable zero emission vehicles – where most consumers will be looking and where taxpayers’ money will make more of a difference.
“The plug-in car grant was introduced 10 years ago to stimulate the early market for zero emission vehicles. Since 2011, the government has provided close to £1.3 billion in plug-in vehicle grant funding to bring ultra-low emission vehicles on UK roads, supporting the purchase of more than 285,000 vehicles.”