Chancellor Rachel Reeves is considering plans to slash charging costs for electric vehicle drivers by cutting the rate of VAT.

The Telegraph reported at the weekend that government officials are considering lowering the 20% VAT rate for public chargers to circumvent the impact of the planned EV pay-per-mile tax. The VAT rate would drop 15% to match the current 5% levy on drivers who charge their vehicles at home, tackling the so-called ‘driveway divide’ for the c.40% of drivers who don’t have access to a driveway to install a home charger.

According to The Telegraph, fears are mounting that the new EV tax – titled Electric Vehicle Excise Duty (eVED) – will “kill EV demand”.

Confirmed in the Autumn Budget, the new tax is currently under consultation and planned to kick in from 2028. The EV road user charge will help counter declining fuel duty revenue as drivers switch to EVs.

For 2028/29, the EV charge will be set at 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrid cars, with the rate per mile increasing annually with CPI. Electric commercial fleet vehicles will be excluded.

When eVED takes effect in April 2028, an average EV driver will pay around £240 per year or £20 per month.

The Telegraph also said Ministers are looking at cutting so-called network charges at public charging points used by EV drivers, which have risen sharply in recent years and now make up a significant portion of charging costs.

A Whitehall source told the newspaper: “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.”

Vauxhall said a 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.

Philip Douglass, Vauxhall Electric Streets director, commented: “Not only will this provide drivers with cheaper charging, but also allows more diverse and accessible options, especially those without a driveway. Vauxhall has been a vocal supporter of FairCharge’s call for a reduction on VAT for public EV charging which, alongside our Electric Streets of Britain campaign, has been vital in helping drivers find practical and accessible charging infrastructure near them.”

ChargePoint also said action to reduce the costs of public electric vehicle charging, including a potential cut to VAT, would be a very welcome step if taken forward.

Antoine Picron, director, Europe public policy at ChargePoint, commented: “For drivers weighing up the switch to an EV, upfront and running costs remain a major factor, particularly in the context of ongoing cost of living pressures and recent proposals to introduce pay-per-mile charging only for EV drivers.”

Following recent UK media reports on the age of the UK vehicle parc, Picron went on: “It is telling that the average car on UK roads is now 9.5 years old, the oldest on record. This points to consumers delaying decisions, and highlights the need to rebuild confidence in the transition to EVs.

“The charging sector is investing heavily to expand and improve public infrastructure. For the UK to accelerate EV adoption, government action on availability and affordability will be an essential part of these efforts.”