Electric vehicle (EV) owners who lack access to home charging are projected to face a double tax burden starting in 2028, according to analysis by charge point operator Be.EV. This comes in the form of a new pay-per-mile road tax and the continued application of a 20% Value Added Tax (VAT) on public charging.
The government is currently contesting a tribunal ruling that deemed the higher VAT rate on public charging unlawful, a rate that compares unfavorably to the 5% VAT applied to home charging. This legal battle means drivers have potentially been overcharged for years.
Analysis indicates that the average UK EV driver exclusively using public charging spends approximately £1,349 annually on charging costs. Of this amount, about £225 is VAT. Drivers who charge at home, in contrast, pay an estimated £18 annually, highlighting a significant disparity.
Introduction of Electric Vehicle Duty (eVED)
Starting in 2028, the proposed pay-per-mile charge, championed by Rachel Reeves, is expected to add an average of £242 per year to the costs for EV drivers. Be.EV has characterized this as a "poverty tax" from the Labour government. This new tax, referred to as Electric Vehicle Duty (eVED), is projected to generate £1.9 billion for the government by 2030, a measure intended to offset the loss of revenue from traditional motoring taxes as more drivers switch to EVs.
If the pay-per-mile charge were implemented today, drivers relying solely on public charging would face combined costs of roughly £1,591 annually, including the 20% VAT on charging. For comparison, a driver with a home charger would pay around £615 for the same mileage, resulting in an annual difference of £975 for those without off-street parking.
Potential Savings and Government Costs
Be.EV suggests that if VAT on public charging were reduced to 5%, the annual charging bill for drivers relying on public infrastructure would fall to approximately £1,180. The company estimates that the government's own figures place the cost of reducing VAT at only £85 million per year.
Asif Ghafoor, CEO of Be.EV, stated that the government's desire to lower the cost of electric vehicles and encourage more people to switch is contradicted by its stance on public charging VAT. He argued that a reduction in VAT would help accelerate the 2030 EV transition by making electric vehicles more accessible.
"The maths is simple: £85 million a year to fix a system that is actively penalising the people the 2030 transition depends on. That is not a difficult decision," Ghafoor commented, emphasizing the relatively low cost of implementing the VAT reduction compared to its potential benefits for EV adoption.