Fresh analysis from New AutoMotive reveals an annual £172m VAT penalty on electric vehicle (EV) drivers who can’t charge at home.
The study of 2.2 million battery-electric vehicle owners shows renters and those without off-street parking are hit hardest by the UK Government’s recent cut to VAT on domestic electricity.
It finds the temporary VAT cut – Prime Minister Andy Burnham’s first policy announcement – and effective from 1 October, disproportionately benefits EV owners who already have the cheapest charging options.
Yet it also shows in every segment of the study, including those with the ability to charge domestically, VAT paid on public charging outstrips any savings from the home electricity cut. This is due to all EV drivers needing to use the public charging network.
Worst off are the 9% of drivers with no home charging, around 200,000 people, who save nothing yet pay £216 a year in VAT on the public network. The second most hit group are drivers using extension leads or “gully charging”, who save £21 from the domestic cut, yet pay £113 in VAT on public chargers.
In addition, even those best served by the VAT cut, drivers with a home charger on a cheap EV tariff, only save £13, but still pay £42 in public charging VAT. Those on a standard tariff can save £27, yet pay £62 in public charging VAT.
New AutoMotive has called for the VAT rates on home charging and public charging to be equalised, although it also warns that any VAT cuts, like those to fuel duty, might not be passed on to motorists.
As a result, it is calling for the UK Government to focus on cutting the underlying cost of electricity sold at public charge points.
In order to achieve this goal, it calls for expanding time-of-use tariffs, so public chargers can benefit from the same reductions as domestic overnight rates, reforming grid connections to lower the cost of public charger installation, accelerating cross-pavement solutions, and deploying smart energy and V2G technologies.
Ben Nelmes, Chief Executive of New AutoMotive, said:
“The Government have handed EV drivers with a driveway a tax cut on power they were already paying least for. Meanwhile the driver charging on a public charger down the road, because they’ve got nowhere else to plug in, is still handing 20% to the taxman on every single mile. That’s a design flaw, and it leaves us with a VAT system that asks most of those who can least afford to contribute.”
John Lewis, CEO of char.gy, said:
“Public charging isn’t a lifestyle choice for millions of drivers, it’s the only option they’ve got. Taxing that at four times the rate of home charging punishes exactly the people the switch to electric is supposed to work for. If we want a fair transition, VAT can’t keep treating a driveway as a tax break.”
Vicky Edmonds, CEO EVA England, said:
“This analysis shows the real difference that even a relatively small reduction in electricity costs can make to drivers. Electric cars can already save households thousands of pounds in running costs, making them one of those practical, everyday changes that can genuinely ease the cost of living.
“But far more significant reform is now needed so every driver can truly benefit from EV, not only those with a driveway. That means tackling the underlying cost of public charging, widening access to affordable home and overnight charging, and making sure any savings are passed directly to drivers.”
Image courtesy of Green Car Guide
