Electric vehicle drivers without off-street parking are being hit by a collective £172m annual VAT penalty that completely dwarfs the Government’s upcoming tax cuts, fresh data reveals.

Analysis by transport research group New Automotive shows that the Prime Minister’s flagship energy policy disproportionately rewards wealthy motorists with driveways, while leaving renters and flat-dwellers facing soaring public charging costs.

The data exposes a massive imbalance in the Treasury’s current tax strategy. The Government’s highly publicised cut to domestic electricity VAT, announced as Prime Minister Andy Burnham’s first policy move and effective from 1 October 2026, saves EV drivers a collective £40m a year.

However, because public charging is still hit with the standard 20% commercial VAT rate – compared to just 5% (and now lower) for domestic energy – drivers who rely entirely on the public network are paying up to four times more in VAT than the average household saves.

The findings, compiled using official driver data from the DVLA, DVSA and Department for Transport (DfT), break the UK’s 2.2 million battery electric vehicle owners into four groups:

• Drivers with a dedicated home charger on a cheap EV tariff save just £13 a year from the VAT cut, but still pay £42 in public charging VAT.
• Drivers with a dedicated charger on a standard tariff save the most, £27 a year, yet still pay £62 in public charging VAT.
• Drivers using informal home charging methods, such as extension leads or ‘gully charging’, save £21 but pay £113 in VAT on the public charging they’re forced into.
• The 9% of drivers with no home charging at all – around 200,000 people – save nothing and pay £216 a year in VAT, the highest burden of any group.

In every segment, VAT paid on public charging outstrips the saving from the home electricity cut. For the poorest-served group, the saving is zero.

The findings have intensified pressure on the Government to equalise VAT rates across all EV charging types.

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.”

New Automotive argues the policy has inadvertently exposed a structural unfairness in how EV charging is taxed: those with driveways get virtually tax-free power, while those without, concentrated in cities and among renters, pay a 20% premium simply for lacking access to a plug at home.

John Lewis, CEO of on-street charging specialist Char.gy, echoed the warning: “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.”

New Automotive recommends the VAT rates on home charging and public charging should be equalised. However, the report warns that VAT cuts – as with cuts to fuel duty – might not be passed on to motorists. The company is therefore calling on the Government to focus on cutting the underlying cost of electricity sold at public charge points by:

1. Expanding time-of-use tariffs at public chargers so street-parked drivers can access the same cheap overnight rates as homeowners.
2. Reforming grid connection costs for public charge point operators via Ofgem to lower the underlying cost of public power.
3. ⁠Accelerating access to cross-pavement charging solutions, such as pavement gullies, so more households can charge from their own domestic supply.
4. Deploying smart charging and vehicle-to-grid technology in high-density areas to bring down costs further.

If the domestic VAT cut returns to 5% as scheduled, New Automotive estimates that aligning public charging VAT to match would cost the Treasury £120m in lost revenue. Factoring in the £40m raised from domestic EV charging, the policy change leaves a net gap of just £80m – offering the Government a straightforward, highly fundable fix.

Vicky Edmonds, CEO of EVA England, backed the calls from New Automotive: “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.”