A rule change introduced by Andy Burnham on October 1 has cut VAT on domestic electricity from 5 per cent to zero, saving typical households about £45 a year. However, analysis by consultancy New AutoMotive warns that households without a driveway face an additional £216 in costs, deepening what is being called the “driveway divide”.
Ben Nelmes, CEO of New AutoMotive, said an EV driver charging at home could save up to £27 a year from the VAT cut. But he stressed that drivers who rely entirely on public charging receive no benefit from the cut and can pay around £216 a year in VAT just to charge their car.
Public charging users miss out on VAT cut
Mr Nelmes said: “Drivers who rely entirely on public charging get nothing from the cut and can pay around £216 a year in VAT just to charge their car. Cutting public charging VAT would be a sensible and quick way to start reducing costs for motorists and making it more attractive to go electric.”
The VAT reduction applies only to domestic electricity use, meaning those without dedicated off-street parking must continue paying the full 20 per cent rate of VAT on public charging. According to New AutoMotive’s analysis, this amounts to roughly £216 of tax per year for drivers who depend solely on public facilities.
Renters and off-street parking gap
The disparity disproportionately affects renters, who are less likely to have access to a private driveway or dedicated parking. Ginny Buckley, from Electrifying, highlighted the scale of the issue, noting that government research shows around a third of UK households do not have off-street parking.
Ms Buckley said: “Government research shows around a third of UK households don’t have off-street parking, meaning millions of drivers will depend on public charging – the very people that the government needs to make the switch to electric in the coming years.”
She added: “The Treasury can’t claim ignorance on the topic – I’ve been raising this issue for a long time, charge providers have been calling for a more equal playing field and the late Quentin Willson did brilliant work highlighting this inequity between electric motorists and pushed for change, but it still hasn’t been fixed.”
Treasury challenged over public charging VAT
Ms Buckley also noted that the government has challenged a ruling earlier this year from a tax tribunal that said 20 per cent VAT on public charging did not match up with the regulations. She said: “The government has even challenged a ruling earlier this year in a tax tribunal that said 20% VAT on public charging didn’t match up with the regulations.”
She concluded: “Fairness is a word we often hear from politicians trying to score extra points on a policy decision – the freeze on fuel duty is about fairness for motorists, or dropping VAT on domestic electricity bills is about fairness for homeowners.”
The measure, introduced by Labour Party leader Mr Burnham, is expected to save the typical household about £45 a year, but the gap between EV owners with and without their own charging device is set to widen, according to experts.
