UK Government Considering VAT Cut on Public EV Charging

Officials are considering reducing VAT on public EV charging from 20% to 5% to match home charging rates, addressing tax disparities. This follows concerns over a pay-per-mile scheme starting in 2028, aimed at ensuring EV adoption remains viable amid rising costs.

Officials are exploring a reduction in VAT on public EV charging from 20% to 5%. This would align it with the reduced VAT rate paid by those who charge at home, eliminating the so-called “pavement tax” disparity.

The proposal, long campaigned for by the car industry, was mentioned as a possibility in the Autumn Budget but has gained urgency due to concerns that the planned pay-per-mile road pricing scheme will severely damage EV demand.

The pay-per-mile scheme, set to begin in 2028, will charge EV owners 3p per mile driven. Plug-in hybrids will pay a reduced 1.5p per mile (to account for fuel duty already paid on petrol). EVs will also continue paying the standard £195 annual VED rate introduced for them from April this year.

The Government is also considering cutting VAT at service stations, supermarkets, and residential streets by 15 percentage points.

The current system is said to actively discourage drivers without off-street parking (and thus no home charger) from switching to EVs, as they effectively pay four times more tax than those with driveways.

A government source emphasised that convincing people to switch requires showing EVs are both easy and cheap, with potential savings available. Tax cuts are being viewed as necessary to offset the impact of pay-per-mile.

It also confirmed it is reviewing public charging costs, including energy prices, other contributors, and options to reduce them for consumers.