Prime Minister Andy Burnham's decision to remove VAT on domestic electricity could reduce the cost of charging an electric vehicle (EV) at home to as little as 1.52p per mile, but households without driveways could pay more than ten times that amount when using public chargers.
The VAT on electricity, currently set at 5%, is due to be removed from bills from Thursday, October 1, as part of efforts to tackle the cost of living crisis. The change will reduce the cost of running household appliances and electric radiators, and will also directly benefit EV drivers who charge at home.
Home charging costs fall
EV drivers can currently charge their cars on the driveway for the equivalent of 1.6p per mile if they are on the cheap EV tariff Intelligent Octopus Go. Octopus's EV tariff allows drivers to charge their car from 8p per kWh at night. For an EV with a 100kWh battery, it would cost £8 to charge. With a range of 500 miles, that makes 1.6p per mile. If Octopus passed on the VAT rate savings, this would drop as low as 1.52p per mile.
Burnham announced that the VAT cut will automatically apply to tariffs which are already fixed, not just for households on the standard price cap or those taking new deals, for a period of six months from October 1, 2026.
Public charging remains expensive
But households without a driveway or a designated off-road parking place have to rely on much more expensive public charging. Estimates by Carwow peg the cost of rapid public charging as high as £81 for the same 100kWh battery. Because VAT on public charging is set at 20%, not 5% like home charging (soon to be 0%), 20% of that price - £16.20 - is tax being handed straight to the government in VAT.
An EV with the same 100kWh battery and a 500-mile range would cost 16.2p per mile to run from that charge. For an EV with a lower 400-mile range, that would jump to 20p per mile - the same as it costs to run a petrol car right now on average prices.
Industry criticism and calls for change
EV industry experts have criticised the VAT changes, arguing that it increases the gap between cheap charging at home and expensive public charging even further. EV lobby groups have long warned that the difference risks reducing the switch to electric motoring among lower income households.
Tanya Sinclair, chief executive of Electric Vehicles UK, said the announcement “entrenches one of the biggest inequalities in the UK’s EV transition”. She told the Press Association: “Millions of drivers without off-street parking have no choice but to pay 20% VAT when charging in public, while those with a driveway will now pay none at all. If this Labour Government is serious about a fair transition, it cannot ask EV drivers to pay different prices for the same electricity simply because of where they live.”
Siobhan Doyle, consumer writer at Carwow, said eliminating VAT on domestic electricity “highlights the growing divide in EV ownership”. She said: “If the Government wants to make electric vehicles truly accessible and fair for everyone, equalising public and home charging VAT remains the crucial missing piece of the puzzle.”
RAC head of policy Simon Williams said: “We urge the new Prime Minister to give serious consideration to lowering VAT on public EV charging, so that those without driveways can make the switch to electric motoring more affordably.”
John Lewis, chief executive of public EV chargepoint supplier char.gy, said the policy “throws the unfairness of the current VAT system into even sharper focus”. He continued: “The next step has to be equalising VAT on public charging. The electricity is the same. The tax treatment should be too.”
