VAT cut to widen public EV charging cost gap, analysis shows

EV drivers who are unable to drive at home collectively face the equivalent of a £172 million annual penalty once a pending domestic electricity VAT cut occurs.

That’s according to analysis by transport research organisation New Automotive, which looks at the effects of a 0% VAT rate which will apply to domestic electricity from October 1 for at least six months.

New Automotive said that the cut, which was Andy Burnham’s first policy announcement as Prime Minister, would disproportionately benefit EV drivers who could charge at home, and therefore already had the cheapest charging option available to them, since VAT on electricity from public chargers is applied at 20%.

The analysis split drivers  into four groups: those with a dedicated home charger on a cheap EV tariff; those with a dedicated charger on a standard tariff; those using informal home charging methods such as extension leads or ‘gully charging’; and those with no home charging at all. A certain percentage of public charging was still assumed for those with home chargers.

New Automotive’s analysis found that those with a charger and a cheap tariff would save £13 a year from 0% home electricity VAT, and incur £42 in VAT from public charging, while those with a charger and a standard tariff would save £27 a year and pay £62 in public charging VAT. Informal home chargers would save £21 in home charging VAT but pay £113 in public VAT, while those with no home charging at all – said to be 9% of EV drivers – would save nothing and pay £216 a year in public VAT.

New Automotive said the VAT cut plan had exposed a structural unfairness in how EV charging is taxed, and that rates on home and public charging should be equalised. It said that if domestic electricity VAT returned to 5%, then equalising public charging VAT to match would cost £120 million in lost revenue, against £40 million raised from EV charging on the domestic side, which it described as “a straightforward and fundable fix”.

However, it added that there was a risk VAT cuts may not be passed on to drivers, and therefore said the Government should focus on cutting the underlying cost of electricity at public chargers by expanding the availability of time-of-use tariffs, reforming grid connection costs for charge point operators, accelerating access to cross-pavement charging solutions and deploying smart charging and vehicle-to-grid technology.

Article courtesy of fleetnews.co.uk published 4^th August 2026