Cut VAT on public charging ‘to offset’ VED hike for EVs

A cut in the rate of VAT on using the public network to charge an electric vehicle (EV) could help incentivise registrations and offset a hike in VED for plug-in cars.

That’s according to the AA, which is urging the Chancellor, Rachel Reeves, to cut VAT on public charging from 20% to 5% when she delivers the Spring Statement on Wednesday (March 26). 

The AA estimates that EV drivers could save £4.80 per charge at ultra-rapid chargers if VAT was reduced to match the percentage rate paid to charge your vehicle at home.

Jack Cousens, head of roads policy for the AA, said: “The Chancellor has the opportunity to help the transition to electric cars, by making some positive fiscal choices on Wednesday.

“Cutting VAT to match the domestic rate of 5% will help households without dedicated off-street parking avoid the so called ‘pavement tax’. 

“As well as saving drivers nearly £5 a charge, it would encourage those changing their car to opt for one with a plug.”

The AA is concerned that the introduction of car tax (VED) for EVs from April could hamper owners of new and used plug-in vehicles.

For the first time, VED will be retrospectively applied to EVs that were registered before the introduction of rates. 

Any EV that was registered before April will now be asked to pay the standard rate tax, currently £195 a year.   

On top of the standard rate, any EV registered on or after 1 April 2025 with a list price in excess of £40,000 (the price of the vehicle including any options) will also be liable to pay the expensive car supplement rate of an extra £425 a year for five years after the car's first 12 months on the road.

While The AA believes all vehicles should pay VED, electric vehicle tax should be set at a discounted rate to incentivise their purchase.

Cousens said: “As most private car buyers opt to buy a used car, the introduction of VED at the full rate from 1 April could have a negative impact on the future of EV ownership. 

“Drivers tell us that incentives are still required at this early stage of adoption.

“While all should pay vehicle tax, a discounted rate for EVs would make buyers take notice before spending their hard-earned cash.”

Cost of charging

The AA EV Recharge Report for February 2025 shows that prices were frozen across the board.

AA EV Recharge Report, February 2025 - flat rates

AA EV Recharge Report, February 2025 - peak and off-peak rates