New Prime Minister Andy Burnham has announced a tax cut which could drop the price for drivers charging an EV at home down to as little as 1.52p – but those without driveways could be forking out more than ten times more.
Last week, the new Prime Minister announced that VAT on electricity, currently set at 5%, is set to be removed from bills from October 1 in a bid to tackle the cost of living crisis.
As well as reducing the cost of running household appliances and electric radiators, EV drivers will directly benefit from the reduction if they charge an EV at home.
Right now, EV drivers can charge their cars on the driveway for as little as the equivalent of 1.6p per mile if they are on cheap EV tariff Intelligent Octopus Go. Octopus’ 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.
But households who don’t have a drivewat or a designated parking place off-road to charge their EV have to instead rely on much more expensive publc charging.
And estimates by Carwow peg the cost of rapid public charging as high as £81, for the same 100kWh. And 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.
It means that an EV with the same 100kWh battery and long 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.
Andy 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,
EV industry experts have already hit out at the new Prime Minister’s 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 new Prime Minister’s 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.”