Andy Burnham must close ‘unfair’ £81 driveways loophole | Personal Finance | Finance
It’s been a whirlwind first week for new Prime Minister Andy Burnham, who has kicked off his shoes and put his feet under the table at Number 10 with a series of tax giveaways and promises aiming to undo some of his predecessor Sir Keir Starmer’s most unpopular moves.
One of the most headline grabbing announcements of the week was undoubtedly Burnham’s VAT cut for electricity, which promises to cut an average of £45 off household bills just as they’re set to increase again this October.
But the change has an unexpected kickback for drivers who have made the switch to EVs, as there exists a loophole which further drives home a – and I hesitate to use this laboured phrase – two-tier system for EV drivers.
That’s because anyone who charges an EV at home will be able to benefit from the VAT cut when it’s passed on by energy firms, as they have been told to do. Right now, the cheapest EV tariff on the market offers charging for just 8p per kWh, which would mean charging an 100kWh EV for just £8. Taking 5% VAT off this would drop it slightly more again, by about 40p per charge.
Meanwhile, drivers who rely on public charging infrastructure are not so lucky. Not only do public chargers not benefit from the VAT cut, they also charge higher rates of VAT in the first place, at 20% instead of 5%.
So while people plugging in their Tesla on the driveway at home won’t be paying through the nose, those who aren’t lucky enough to charge at home and need to use public chargers will pay 20p in every £1 to the Treasury for the same amount of electricity. It’s not fair, and campaigners have already called out this loophole in the tax cut which punishes homes without driveways.
Indeed, estimates by Carwow peg the cost of rapid public charging as high as £81, for the same 100kWh. This isn’t ‘premium’ electricity. It’s not somehow higher quality watts and volts entering your battery. It’s the same exact charge, but for more than 10 times the price. And 20% of that price – £16.20 – is tax being handed straight to the government.
Tanya Sinclair, chief executive of Electric Vehicles UK, said the new Prime Minister’s announcement “entrenches one of the biggest inequalities in the UK’s EV transition”.
Siobhan Doyle, consumer writer at Carwow, said eliminating VAT on domestic electricity “highlights the growing divide in EV ownership”.
John Lewis, chief executive of public EV chargepoint supplier char.gy, said the policy “throws the unfairness of the current VAT system into even sharper focus”.
He continued: “The next step has to be equalising VAT on public charging.”
If Mr Burnham quite rightly wants to encourage more people to take up climate friendlier EVs, at a time when the world is literally burning from wildfires and the ground is scorching due to drought, then he needs to address this unfairness and cut bills for all EV drivers, not just the ones already paying the lowest bills possible.
