Electric vehicle drivers could soon see lower charging costs.

The news comes on the back of a UK tax tribunal ruling that electricity supplied at some public charge points should be subject to 5% VAT rather than the current 20% rate.

The decision, issued by the First-tier Tax Tribunal in a case involving the community charging provider Charge My Street, challenges the long-standing tax treatment of public EV charging across the UK.

Changing gear

Until now, electricity used to charge a car at home has typically been taxed at the reduced 5% VAT rate, because it is treated as domestic energy use.

By contrast, drivers using public chargers have been charged the standard 20% VAT rate, increasing the cost of charging for those without access to a driveway or home charger.

Motoring and consumer groups, alongside EV industry commentators and the public, have been arguing that public charging is overpriced and unreliable.

This, in turn, works against government efforts to persuade vehicle owners to adopt EVs as we head toward the ban on new diesel and petrol vehicles.

The tribunal found that, in certain circumstances, electricity supplied at public charging locations should also qualify for the lower rate.

Tax specialists involved in the case described the judgment as a clear victory for campaigners who have long argued the system unfairly penalises many EV owners.

Supporters of the change say the existing rules effectively created what has been dubbed a “driveway divide”, where drivers who can charge at home pay significantly less tax than those who rely on public infrastructure.

Powering the motorists

If the ruling ultimately stands, it could lead to lower charging prices at many public charge points, though the extent will depend on how operators pass on any savings.

Public charging has often been criticised for undermining the cost advantage of electric vehicles.

In some cases, drivers using rapid public chargers can pay as much as, or more than, running a petrol car once electricity prices and taxes are included.

Campaign groups say aligning VAT rates would make EV ownership fairer, particularly for people living in flats or rented homes who cannot install their own chargers.

Research by charging companies has suggested many drivers would switch to electric vehicles sooner if public charging costs were reduced and taxed in the same way as domestic electricity.

Government response

However, the ruling does not automatically change national policy.

HM Revenue & Customs could still challenge the decision or seek permission to appeal.

Tax specialists involved in the case said the tribunal’s judgment strongly rejected HMRC’s interpretation of the rules surrounding how electricity supplies should be classified for VAT purposes.

The Treasury has already been reviewing the issue amid wider debates about the affordability of electric motoring.

Officials have previously examined whether the VAT charged on public charging should be reduced to 5% to match the rate applied at home.

For ministers, the issue sits at the intersection of tax policy, fairness and the government’s wider climate goals.

Still anxious

The debate is becoming increasingly important as Britain’s electric vehicle network expands rapidly.

At the start of 2025 there were around 73,000 public charge points, and the government estimates 300,000 may be needed by 2030 to support the transition away from petrol and diesel cars.

While EVs range has consistently increased over recent years, range anxiety remain a significant issue preventing people from moving to electric motoring.

The lack of an effective, reliable and finan ciaslly efficient charging network remains a significant issue, and continues the fears over range anxiety. 

With millions more drivers expected to switch to electric vehicles over the next decade, campaigners say the tax system needs to keep pace with how motorists actually charge their cars, and the costs involved.

The tribunal ruling may therefore mark a significant moment in the evolution of EV policy in the UK, but whether it results in lower costs for drivers nationwide will now depend on the government’s next move.