Prime Minister Andy Burnham's decision to cut Value Added Tax (VAT) on domestic electricity bills by 5% for six months, starting October 1, is set to benefit most existing electric vehicle (EV) owners who charge at home. However, the move is expected to exacerbate the cost disparity for the estimated nine million households in the UK without driveways who rely on public charging infrastructure.
The government claims the £850 million cost of the measure will be funded by eliminating the ID cards scheme. This VAT reduction is intended to offset an anticipated increase in the Ofgem energy price cap. For drivers with home wallboxes tapping into domestic tariffs, the move will lower charging costs, which are already significantly cheaper than public charging.
Currently, the domestic electricity price cap stands at 26.11p per kWh. At this rate, charging a 100kWh EV battery would cost approximately £26.11. In contrast, public charging stations typically cost around 83p per kWh, making the same 100kWh charge approximately £81. This difference means drivers without off-street parking face substantially higher expenses for EV charging.
EV industry experts suggest that while the VAT cut will make EV ownership even more appealing for the majority of UK households with driveways, it will do little to attract those dependent on public chargers. Vicky Edmonds, CEO of advocacy group EVA England, stated that the reduction is welcome for home chargers but that millions without driveways "will not fully benefit because they can't easily access home charging." She urged the government's Cost of Public Charging Review to implement structural reforms to lower public charging prices.
John Lewis, chief executive of char.gy, pointed out that drivers relying on public charging will continue to pay 20% VAT on electricity, while those charging at home will benefit from the reduced rate. He called for equalizing VAT on public and home charging, arguing that the electricity itself is the same and should be taxed similarly.
Guy Bartlett, CEO of the Believ public charging network, echoed these sentiments, calling for an end to the "charging postcode lottery" and advocating for aligning VAT on public charging with home energy rates to improve EV affordability for all.
Latest figures indicate that approximately 67.2% of UK households have access to a driveway or dedicated parking space, totaling around 19 million households. These are the households most likely to switch to EVs, given the lower running costs. Conversely, the remaining 32.8%, or about 9 million households, lack such facilities.
Data from the Department for Transport shows that 91% of current EV owners in the UK have access to home charging, highlighting a significant divide in EV ownership heavily favoring those with driveways. Drivers in terraced properties and flats constitute only 9% of the nation's EV ownership base.