Government rules out changing VAT on public EV charging

The Government has published its response to recommendations in a House of Lords electric vehicle report (EV), and has ruled out any changes to VAT rules for public EV charging.

The report from the Environment and Climate Change Committee called on the government to explore options for equalising the VAT differential between public and domestic charging by reducing the 20 per cent VAT rate applied to public charging to five per cent, in line with domestic electricity.

The government, however has ruled this out, citing that expanding the VAT relief "would impose additional pressure on the public finances to which VAT makes a significant contribution".

Positively, however, the Government said it agreed with the report’s recommendations to keep low rates of BIK.

It said: “From 2025 company car taxes for electric vehicles will increase 1% year on year to a total of 5% for battery electric vehicles by April 2028.

“By contrast the company car tax rate for petrol and diesel cars will increase by 1% in financial year 25/26 and then be maintained, with the most polluting cars subject to 37% rates by 2028.

“The Government has committed to keeping the transition to electric vehicles affordable."

The government has also ruled out introducing new incentives for the plug-in retail car market, saying that its incentives have been in place for over a decade and have helped reduce the up-front purchase price of new EVs.

It says it is targeting its incentives where they have the most impact and deliver the greatest value for money. "Plug-in Grants will continue until at least financial year 2024/25 for motorcycles vans, taxis, trucks and wheelchair accessible vehicles," the government said.

Regarding workplace charging, the government has said it will assess the impact that the grants have had on the market and consider if future incentives are proportionate

In response to concerns over the rollout of workplace charging in the report, the Government says that, over the coming year, it will assess the impact that grants have had on the market and consider if future incentives are proportionate.

The Environment and Climate Change Committee has recommended the government review the schemes that other countries, including Scotland and the Netherlands have implemented to incentivise the purchase of second-hand EVs, evaluate their outcomes and explore whether similar schemes could be offered in England and Wales.

The government said it "notes" this recommendation, but that industry intelligence suggests that some EVs on the used market are now similar in price to their petrol and diesel equivalents, and quotes data from the SMMT showing that, in 2023, used EV sales increased by 90.9%, increasing the pool of available vehicles.

The government said it chairs a working group with several stakeholders to ascertain potential barriers to the uptake of used electric vehicles and that it "will consider all policy options, to address potential failures in the market".