The UK Treasury is exploring VAT cuts on public EV charging after internal forecasts warned that upcoming taxes could slash electric vehicle sales by 400,000 units over the next four years.
Chancellor Rachel Reeves is reportedly examining reductions to both VAT rates and network charges as officials scramble to offset the impact of a planned pay-per-mile tax hitting EVs in 2028.
According to the Telegraph, Treasury sources acknowledge that the 3p-per-mile levy threatens to “kill EV demand” just as the government pushes to accelerate electric vehicle adoption.
The charging industry has campaigned for years to eliminate the VAT disparity between public and domestic charging. Public chargers currently face 20% VAT while home electricity carries just 5% – a gap that penalizes drivers without home charging access.
A Whitehall source told the Telegraph that tax cuts were necessary to “cushion the blow” from the incoming per-mile charge.
Growing Cost Pressures
The 3p-per-mile tax will cost the average EV driver roughly £255 annually. Treasury officials designed the levy to replace declining fuel duty revenue as drivers abandon petrol and diesel vehicles.
But the charge threatens to undermine pro-EV policies like the Electric Car Grant, which provides up to £3,750 off new vehicle purchases.
ChargeUK, representing the UK’s charging network operators, reported that standing charges jumped up to 462% in just 12 months. These fixed costs now account for 70% of total energy expenses for public charging companies.
The cost gap between home and public charging has widened dramatically. Drivers with home chargers pay around 7p per kilowatt-hour, while the estimated 40% of households without off-street parking face average public charging costs of 54p per kilowatt-hour, according to Zapmap data.
Vicky Read, ChargeUK’s chief executive, welcomed potential government intervention.
“Reports of the government’s review into the cost of public EV charging are positive to see,” she told EV Powered. “It is encouraging to see that cutting VAT on public charging to the five per cent level of home energy bills is being considered.”
Read emphasized that the review must address “charge point operators surging energy costs, standing charges in particular” to make EVs more affordable for drivers without home charging options.
Policy Balancing Act
The Treasury faces competing pressures as it tries to maintain EV adoption momentum while replacing lost fuel duty revenue.
Government officials have invested heavily in electric vehicle incentives, including nearly £7.5 billion in sector funding and the Electric Car Grant program that’s already benefited almost 50,000 buyers.
But the 2028 pay-per-mile tax represents a fundamental shift toward usage-based taxation that could slow the transition away from combustion engines.
A government spokesman defended the administration’s approach: “The Government is boosting the EV transition by saving drivers up to £3,750 off a new car… and investing over £7.5bn into the UK electric vehicle sector.”
Officials confirmed they’re “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.”
The review comes as the UK works to meet Zero Emission Vehicle mandate targets requiring increasing percentages of new car sales to be electric. Industry observers say charging costs remain a key barrier to mass EV adoption, particularly for drivers who can’t charge at home.
