Prime Minister Andy Burnham has been urged to introduce a new rule to equalise VAT on public electric vehicle (EV) charging with the domestic rate, a move that could save higher-mileage drivers around £389 a year. The call comes after the government cut VAT on household electricity from 5% to 0% on 1 October 2026, a decision that benefits EV owners who charge at home via a private driveway.
However, drivers who rely on public charging stations still face a 20% VAT rate, creating what industry figures describe as a "driveway divide". Tom Preston, Chief Executive Officer at Hippo Leasing, said: "Equally, the current 20% VAT rate on public EV charging effectively penalises motorists who don't have a driveway."
Public charging costs more, says leasing boss
Preston highlighted the unfairness of the current system, noting that it costs more to plug in on the street than at home. "Right now, it costs more to plug in on the street than it does at home, and that's exactly backwards for the drivers who don't have a driveway, often the ones we most need to bring into EVs," he said.
The disparity disproportionately affects lower-income households, according to Preston. "The people paying more are usually the ones who can least afford it, such as renters and flat-dwellers. Essentially, anyone without off-street parking," he added.
Equalising VAT could save £389 per year
Equalising public charging VAT with the 5% domestic rate could save high-mileage EV drivers around £389 a year, making electric leasing far more accessible for urban households, Preston explained. The figure is based on typical usage patterns for drivers who cover high annual mileages and rely on public charging infrastructure.
The 0% VAT rate on household electricity, which took effect on 1 October 2026, applies to both standard variable and fixed-rate tariffs. All suppliers are required to pass the savings on to all customers automatically.
Government estimates £45 annual saving for average household
The Labour Party government estimates that the VAT cut will take around £45 off energy costs over a year for the average customer. However, the actual saving depends on how much electricity a household uses, as the reduction is applied to both the daily standing charge and the unit rate (per kWh).
From 1 October 2026, VAT on energy prices is 0% for electricity and 5% for gas. For households that receive both gas and electricity from the same supplier, the VAT saving applies only to the electricity portion of the bill.
The government's £45 estimate is based on average household usage, so individual savings will vary depending on a home's electricity consumption. The 5% reduction is applied to both the daily standing charge and the unit rate (per kWh).
