Around 200,000 electric vehicle (EV) drivers in the UK who rely on public charging points will miss out on the government's VAT removal from household electricity bills, potentially leaving them £200 a year worse off compared to those with home chargers.
VAT cut on household electricity
The government has confirmed that VAT on household electricity bills will be reduced from 5% to zero from October 1. The move is expected to save a typical household around £45 a year, with Business Secretary Jonathan Reynolds saying it will give families some "breathing space" as energy costs remain high.
However, drivers who charge their electric vehicles at home will benefit from the reduced electricity rate, while those using public charging points will continue to pay 20% VAT on their charging costs.
Public charging disparity
Research by consultancy New AutoMotive estimates that around 200,000 EV drivers do not have access to a home charger. These motorists already pay around £216 a year in VAT through using public charging facilities, making them some of the hardest hit by the current system.
According to ZapMap, drivers with a home charger typically pay around 9p per kilowatt hour, while the cheapest public chargers cost about 54p per kilowatt hour.
Call for reform
Ben Nelmes, chief executive of New AutoMotive, said: "The Government have handed EV drivers with a driveway a tax cut on power they were already paying least for. Meanwhile the driver charging on a public charger down the road, because they've got nowhere else to plug in, is still handing 20% to the taxman on every single mile. That's a design flaw, and it leaves us with a VAT system that asks most of those who can least afford to contribute."
The organisation is calling on ministers to introduce time-of-use tariffs for public charging, allowing drivers without off-street parking to benefit from cheaper overnight electricity rates.
Government response
A Government spokesperson said: "We are boosting the EV transition by saving drivers up to £3,750 off a new car, with more than 95,000 people benefitting already, and investing over £7.5 billion into the UK electric vehicle sector. We're also reviewing the cost of public EV charging which will look at the impact of energy prices, wider cost contributors, and options for lowering these costs for consumers."
The VAT reduction forms part of the new Government's plans to ease the cost of living and will apply across England, Scotland and Wales from October 1. The tax cut will be funded by cancelling the proposed Digital ID programme, costing £850 million during the current financial year. The measure is due to remain in place until the end of the 2026-27 financial year, with any extension requiring future Budget decisions.
