Government could slash EV public charging costs to offset losses from pay-per-mile tax
EV owners may soon pay less to used public charging stations under plans under discussion...
The Government is reportedly planning to cut electric car charging costs amid fears that the new pay-per-mile tax will reduce EV uptake.
According to the Telegraph, chancellor Rachel Reeves is preparing to bring in a number of measures to offset the projected effects of the new eVED – a pay-per-mile tax announced in the Autumn Budget that will apply to electric car and plug-in hybrid owners.
While the eVED isn’t due to come into force until 1 April 2028, the Office for Budget Responsibility (OBR) estimates that 440,000 fewer EVs will be sold between November 2025 and March 2031 as drivers are disincentivised from making the switch.
According to the report, the Government is considering reducing the current 20% VAT rate on public charging down to 5% to bring it in line with the rate EV owners pay to charge their car at home. It also reportedly plans to cut the network charges imposed by charging providers.
Industry experts have met with government officials over recent weeks, with one person involved telling the Telegraph that the Treasury fears the pay-per-mile tax will “kill EV demand”. The source said: “The way we convince people to switch to EVs is by showing people it is easy and it is cheap. There are savings to be had here for many people.”
The Government initially tried to offset the effects of the new pay-per-mile tax by raising the threshold at which EV owners pay the expensive car supplement, or “luxury car tax”, from £40,000 to £50,000. The OBR estimated this would stimulate EV sales by 130,000 – some way off the projected 440,000 losses from the eVED.
Philip Douglass, Vauxhall Electric Streets Director, welcomed the news of a reduced VAT rate for public charging. “The reduction of VAT in line with home charging would be a huge boost in tackling the cost barrier that stands in the way for many drivers wanting to switch to electric,” he said.
“Not only will this provide drivers with cheaper charging, but also allows more diverse and accessible options, especially those without a driveway.”
The RAC estimates that there are currently around 1.4 million EVs on UK roads, a figure which is set to rise in accordance with the Government’s ZEV Mandate, which states that electric car sales must account for 80% of the new car market by 2030.
According to research by the RAC Foundation, around 35% of British households don’t have access to off-street parking, leaving them to rely on the public charging network, which is much costlier. According to Zap-Map, EV drivers pay, on average, 54p/kWh (for slow/fast chargers) or 77p/kWh (for rapid/ultra-rapid chargers) when public charging their vehicle, while those who charge at home typically pay around 9p/kWh during off-peak times. Slashing the public charging VAT would mean huge savings for those without the ability to home charge.
A Treasury spokesperson said: “The Government is boosting the EV transition by saving drivers up to £3750 off a new car, with almost 50,000 people benefitting already, and investing over £7.5 billion into the UK electric vehicle sector.
“We’re also reviewing the cost of public EV charging, which will look at the impact of energy prices, wider cost contributors and options for lowering these costs for consumers.”
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