EV drivers spend extra £85m on VAT when using public chargers | Electric, hybrid and low-emission cars

Electric vehicle drivers will spend an extra £85m on UK tax when using public car chargers this year because of a disparity in VAT rates that the industry has said is holding back the transition away from fossil fuels.

Home users of electricity pay just 5% VAT compared with the 20% rate that applies to businesses – including electric car charger operators. That means that people charging a car using public chargers face higher costs.

The data company Zapmap has calculated the £85m extra cost figure for 2025 based on usage patterns. That extra VAT is forecast to increase by £315m by 2030 as EVs rise towards 80% of all new car sales under the government’s zero-emission vehicle (ZEV) mandate.

The government is preparing to relax the ZEV mandate amid falling sales across the car market. Carmakers argued that removing the disparity in VAT rates would help increase demand for electric cars.

Eurig Druce, the UK group managing director of Stellantis, the owner of brands ranging from Vauxhall and Fiat to Jeep and Peugeot, said: “The path to electric has been set. But there is a real risk of creating a two-tier motoring system where those with a driveway pay less to get around than those without. That can’t be right.”

The FairCharge campaign group has written to Darren Jones, the Treasury chief secretary, arguing that this “pavement tax” is holding back the transition, according to a letter seen by the Guardian.

Quentin Willson, a former presenter of the TV series Top Gear, who founded the campaign, wrote that the failure to equalise rates between public and private chargers was a “bizarre and conspicuous policy omission”.

“Reducing the VAT burden on public charging has become an obvious and very necessary part of this country’s progress towards electrification,” Willson wrote.

The extra cost to electric car drivers in 2025, at £85m, is far below the £2bn the government committed to a freeze on fuel duty for polluting petrol and diesel cars in the October budget. That continued freeze drew strong condemnation from environmental groups. The chancellor, Rachel Reeves, argued that it would avoid adding an extra burden to struggling households.

The cost of removing the charging disparity would be tiny relative to the implicit subsidies given to petrol. However, the Treasury may be averse to cutting VAT on public charging given that fuel duties will fall as more people go electric.

Delvin Lane, the chief executive at InstaVolt, a charge point operator, said he would immediately pass any VAT cut to customers in the form of cheaper prices.

“This small change would bring fairness to those without home chargers, encourage more drivers to switch and support price parity between home and public charging,” he added. “It’s surprising that there has been no movement on this.”

Matt Galvin, the managing director of the electric car brand Polestar in the UK, said: “This is an urgent requirement to support EV adoption, particularly to encourage the private buyer, and prevent unfair costs to those without driveways.”

A Treasury spokesperson said: “The shift to electric vehicles is crucial for decarbonising the transport sector and tackling climate change, and will support growth and productivity across the UK.

“Our balanced approach ensures fiscal stability while continuing to provide incentives through the tax system such as freezing vehicle excise duty first-year rates for EVs to encourage the transition to electric and zero emission vehicles.”