The Chancellor of the Exchequer, John Healey MP, has been warned that his VAT cut on public electric vehicle (EV) charging points, effective from October 1, will not benefit renters or drivers without off-street parking. The warning comes as new analysis reveals that these drivers are being forced to pay significantly more in VAT compared to those who can charge at home.
VAT cut fails to address inequality in EV charging
According to a report by New AutoMotive, drivers who rely on informal home charging methods, such as extension leads or “gully charging,” save £21 but end up paying £113 in VAT on the public charging they are forced to use. This is because public charging is subject to a higher VAT rate than domestic electricity, creating a disparity that the upcoming VAT reduction does not resolve.
The report recommends that VAT rates on home charging and public charging should be equalised to ensure fairness. The findings have been backed by Vicky Edmonds, CEO of EVA England, who stated: “This analysis shows the real difference that even a relatively small reduction in electricity costs can make to drivers.”
Electric cars and the cost of living crisis
Ms Edmonds highlighted the broader benefits of electric vehicles, saying: “Electric cars can already save households thousands of pounds in running costs, making them one of those practical, everyday changes that can genuinely ease the cost of living.” However, she stressed that more significant reform is needed to ensure every driver can benefit from EVs, not just those with a driveway.
“That means tackling the underlying cost of public charging, widening access to affordable home and overnight charging, and making sure any savings are passed directly to drivers,” she added. The call for reform is directed at political leaders, including Andy Burnham, the Mayor of Greater Manchester, who is being urged to take action on this issue.
Healey defends VAT cut as cost-of-living relief
When the VAT cut was announced, Chancellor John Healey defended the measure, stating: “For too long, too many people have struggled with the cost of living. Today’s energy tax cut will give families some breathing room on bills, and provide some reassurance this winter.”
Healey also explained the funding and expected impact: “This measure is funded this year from cancelling the Digital ID programme, and it will help bring down inflation while supporting households in every postcode.” The VAT cut, which reduces the rate from 5% to 0%, is estimated to reduce CPI inflation by around 0.10 percentage points and RPI by around 0.14 percentage points.
Cost and implications of the VAT cut
The Treasury estimates that the VAT cut will cost around £850 million in 2026-27, based on estimated electricity prices. Updated costs will be set out at the Budget. While the cut is intended to ease the financial burden on households, critics argue that it fails to address the structural inequality in EV charging costs, particularly for those without access to home charging facilities.
As the UK pushes towards its net-zero targets, ensuring equitable access to affordable EV charging will be crucial. The report by New AutoMotive and the comments from EVA England underscore the need for policymakers to consider all drivers, not just those with private parking, in the transition to electric mobility.
