The government's decision to remove VAT from household electricity bills, effective from October, could widen the cost disparity for electric vehicle (EV) owners. Prime Minister Andy Burnham announced the removal of the current 5% VAT rate on domestic electricity for a period of six months, which is expected to reduce the cost of charging an EV at home.
Industry estimates suggest that drivers utilising off-peak home charging tariffs could see running costs drop to approximately 1.5p per mile. However, households without off-street parking will continue to face higher costs, as public charging remains subject to 20% VAT. Rapid public charging could potentially cost between 16p and 20p per mile, depending on the vehicle and charger used.
This difference has led to renewed calls for the government to equalise VAT rates across public and domestic EV charging. Industry groups argue that households lacking driveways are being unfairly penalised. Electric Vehicles UK warned that these tax changes risk increasing inequality between households with and without private parking, stating that drivers unable to charge at home have limited options but to pay significantly more for the same electricity.
Tanya Sinclair, chief executive of Electric Vehicles UK, told the Press Association that millions of drivers without off-street parking are compelled to pay 20% VAT for public charging, while those with a driveway will now pay none. Simon Williams, RAC head of policy, urged the new Prime Minister to consider lowering VAT on public EV charging to make electric motoring more affordable for those without driveways.