New Prime Minister Andy Burnham has announced a VAT cut on electricity, reducing household bills by an average of £45. However, the policy has created a loophole that unfairly penalises electric vehicle (EV) drivers who cannot charge at home.
Home charging benefits from VAT cut
Drivers who charge their EVs at home will benefit from the VAT reduction when energy firms pass on the savings. The cheapest EV tariff charges 8p per kWh, making a full 100kWh charge cost just £8. The 5% VAT cut would reduce this by about 40p per charge.
Public charging costs ten times more
Drivers reliant on public charging points face a different reality. Public chargers do not benefit from the VAT cut and are subject to 20% VAT instead of 5%. This means those without driveways pay 20p in every £1 to the Treasury for the same electricity. According to estimates by Carwow, rapid public charging can cost as much as £81 for 100kWh, with £16.20 of that being tax.
Campaigners call out inequality
Tanya Sinclair, chief executive of Electric Vehicles UK, said the announcement “entrenches one of the biggest inequalities in the UK’s EV transition”. Siobhan Doyle, consumer writer at Carwow, said eliminating VAT on domestic electricity “highlights the growing divide in EV ownership”. 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 added: “The next step has to be equalising VAT on public charging.”
The policy has been criticised for punishing drivers who cannot charge at home, creating a two-tier system for EV owners. To encourage wider EV adoption, the government is urged to address this unfairness and cut bills for all EV drivers, not just those already paying the lowest rates.
