Tax on charging an EV at home is being cut from today (October 1) opening the door to cheaper charging for millions of drivers.
October 1 marks the start of a six-month pause on VAT charges on domestic electricity in Great Britain, announced by Prime Minister Andy Burnham in July. The move cuts VAT from 5% to 0% on the same day that the Ofgem price cap increases by 4% to £1,723 per year for an average household.
The Government estimates that the change could save an average British household up to £45 a year off the Ofgem price cap figure. It is also estimated that the move could save EV owners between 40p and £1.15 per charge – equivalent to between £8 and £25 per year for an average mileage driver.
Burnham said the move aimed to give UK residents “breathing space” and take pressure off household bills over the winter months.
The plan, which runs until the end of March 2027 has been widely welcomed but industry observers have warned that it further highlights the huge gap between those able to charge at home and those reliant on public charging.
Public charging is still liable for VAT at the full 20% after HMRC appealed against a tax tribunal ruling that would have seen it cut. The first-tier tribunal ruled that public charging should qualify for the same ‘de minimis’ 5% rate of VAT as domestic electricity.
Industry body ChargeUK estimates that drivers who largely or wholly rely on public charging pay more than £1,000 more per year that those who mostly charge at home, with VAT now accounting for £200 of that difference.
The group’s CEO, Shane Brennan, said: “Cutting VAT on home electricity is the right call at the right time, it will relieve some pressure on what will be a tough winter for energy consumers, including EV drivers.
“However, it will also entrench the driveway divide for those current and want-to-be EV drivers who pay the full 20% VAT to charge their cars at the worst moment.
“With diesel prices topping £2 a litre this week, and petrol not far behind, encouraging all drivers to go electric is the right thing to do, let’s make it fair and accessible for all.”
Vicky Edmonds, chief executive officer, EVA England said: “VAT relief on home electricity will provide welcome support with household energy bills. But for EV drivers, it just risks widening the existing ‘charging divide’ between those who can charge affordably at home and those who depend on the public network. The Government must take urgent action to close that charging divide, and reducing VAT on public charging would be a simple and visible first step towards doing so.”
ChargeUK members are highlighting the VAT disparity with various activities around the date. Fastned is offering a £25 charging credit to drivers using any of its 41 charging hubs, while Gridserve is cutting prices on its charging network by 20% for one day.
