Labour officials have indicated they will continue to evaluate the current value-added tax (VAT) applied to public electric car charging points, following concerns voiced by the automotive industry.
At present, owners of electric vehicles who charge their cars at home benefit from a reduced VAT rate of five per cent. However, those relying on publicly available charging stations face a higher standard rate of 20 per cent, creating a disparity in costs.
This inequality was brought to the attention of Parliament this week by Liberal Democrat MP Paul Kohler, who argued that the difference disadvantages some EV users and could hinder broader adoption. Kohler suggested aligning public charging VAT with home charging rates as a way to stimulate demand for electric vehicles at a pivotal moment for the UK automotive sector.
Transport Secretary Heidi Alexander acknowledged the situation, stating, “The Government does keep the VAT variation between public and private charging under review.” She explained that the 20 per cent rate applied to public charge points is consistent with most goods and services, noting limited exemptions. However, she did not commit to lowering the rate.
Instead, Alexander highlighted ongoing investments aimed at affordability. We’re investing £380 million to roll out overnight charging solutions, which offer lower rates for those without dedicated off-street parking,
she told MPs.
This approach comes as the UK automotive industry faces significant headwinds, including recently announced 25 per cent tariffs on British car exports imposed by the United States—a trade impact valued at approximately £8 billion.
Conservative MP Gareth Bacon, Shadow Transport Secretary, criticised Labour’s handling of the transition to electric vehicles, accusing the Government of exacerbating uncertainty.
Alexander countered this criticism, asserting that her government was addressing issues where previous administrations had fallen short and providing stability for businesses. She also pointed to the £2 billion Automotive Transformation Fund designed to bolster battery gigafactory construction and strengthen the EV supply chain.
Other proposals discussed during the debate included calls for adjustments to Benefit-in-Kind (BiK) tax rates associated with company cars, a factor influencing electric vehicle adoption. Industry representatives have cautioned against rapid increases in BiK rates, fearing they could negatively impact efforts to increase EV uptake during this crucial transition.
The Liberal Democrats have advocated for equalizing VAT rates alongside improvements to the charging infrastructure as a means of removing a key barrier to EV adoption—particularly benefiting those who lack home charging access and currently pay 15 per cent more in tax.
The Government appears focused on alternative solutions, with Alexander emphasizing investment in overnight charging infrastructure as a way to mitigate costs for drivers.
Alexander concluded: We’re providing certainty to businesses. We’re protecting jobs within a vital industry, reducing carbon emissions, and fostering a competitive market that benefits consumers.
- VAT on Home Charging: 5%
- VAT on Public Charging: 20%
- Government Investment in Overnight Charging: £380 million
- Automotive Transformation Fund: £2 billion
Recent data reveals a significant surge in electric vehicle sales, with demand increasing by 40 per cent between February and March of this year.
