Rachel Reeves is considering a cut in VAT on public electric car charging to make EVs more affordable for drivers without home chargers. The move comes amid growing concerns that demand for electric cars could drop once the new pay-per-mile tax is introduced.
Treasury officials are reportedly looking at reducing public charging VAT from 20% to 5%, aligning it with the lower rate applied to home charging. The change would remove what industry experts call the EV “pavement tax” – the extra cost faced by drivers who rely on public chargers.
The measure was flagged as a possibility in the Autumn Budget but has reportedly been prioritised after worries grew about the impact of the Chancellor’s planned road pricing scheme, which will charge EVs 3p per mile from 2028. A Treasury source told The Telegraph that there are fears the levy could “kill EV demand.”
Officials have recently met with industry representatives to discuss the issue. The Government is also exploring similar VAT reductions at service stations, supermarkets, and on residential streets, with all cuts potentially around 15%.
Charging at home is often much cheaper than using public stations. According to the AA Recharge Report, topping up at a 7kW home charger costs just £5.88 to reach 80%, while a slow 8kW public charge can cost £11.30. But the discrepancies in cost can be huge depending on when and where you charge. Kerbo Charge estimates that some public chargers can cost up to 450% more than off-peak home charging – rising to 690% for rapid chargers.
The Society of Motor Manufacturers and Traders says this system penalises drivers without off-street parking, charging them up to four times more than those who can plug in at home.
What is the pay-per-mile tax?
The pay-per-mile scheme will see EV owners pay 3p for every mile driven, in addition to the £195 annual VED rate introduced this April. Plug-in hybrids will pay 1.5p per mile, as they still contribute fuel duty on petrol.
The charge, due in 2028, is expected to raise £1.9 billion by 2030. It aims to replace lost motoring tax revenue – including fuel duty – and fund road maintenance across the UK.
When the plan was announced, the Office for Budget Responsibility estimated the average EV driver (8,500 miles per year) would face an extra £255 annually. They warned this could cut EV sales by 440,000 over five years, though the Treasury predicts a smaller impact of 120,000 fewer EVs by 2030.
A Whitehall source told The Telegraph: “The way we convince people to switch to EVs is by showing it is easy and cheap. Reducing public charging costs could help a lot of people.”
The Government said it is already supporting the EV transition, offering up to £3,750 off new cars, helping almost 50,000 people so far, and investing more than £7.5 billion into the sector.
