I always hear is that EV's are cheaper to run. Whilst at the moment its clear EV's generally cost much less to run if you can charge cheaply at home, have access to cheap public or work charging. As the take up of EV's increase I can see costs will steadily increasing. Personally I've never liked to say EV's are cheap to run as I don't think it will stay like this forever, and saying to someone they should get an EV because they are cheapo only to see running costs increase as soon as they get one isn't good. We are already seeing the erosion of the previously low running costs through various ways such as:
Car tax
For a number of years EV's didn't pay 'Car tax', or VED (Vehicle Exercise Duty) as it is known. Petrol and diesel cars have paid VED based on the vehicles emissions. From 1st April 2025 EV's registered after 1st April 2017 will pay £195 per year. EV's registered between 1 March 2001 and 31 March 2017 will pay £20 per year. These changes bring EV's into line with the same VED cost of petrol and diesel vehicles registered after 2017 which means EV's will pay a similar amount in VED as petrol and diesel vehicles.
Expensive Car Supplement
The Expensive Car Supplement applies to vehicles that cost over £40,000 (list price not actual purchase price after any discount). It's paid for five years in years 2 to 6 of the car life.
Previously EV's were exempt from the Expensive Car Supplement. Any EV's registered from 1st April 2025 with a list price higher than £40,000 will need to pay it for the 5 years. If buying an EV now you need to double check the list price of the vehicle as the price you actually pay may be lower than the list price so don't get caught out.
The current expensive car supplement cost is £425 per year. This is in additional to the £195 VED tax so it brings the overall VED tax cost to £620 for years 2 to 6, or £3,100 over the first five years life of an EV.
Company cars - Benefit in Kind (BiK) rates
Favourable Benefit in Kind (BiK) rates have been used by the government to promote the uptake of EV's in company car users, just as it was previously used to promote the uptake of diesel vehicles.
Originally EV's were charged at 16% BiK in 2019/20. This dropped to 0% BiK in 2020/21. They have since steadily increased to 3% BiK in 2025/26 . By 2029/30 they are expected to rise to 9% BiK. This means they will likely return to the previous 16% BiK rate or be as high as petrol and diesel car BiK rates. The days of super cheap EV's as company cars are likely to be disappearing.
Fuel Duty and VAT
When we compare the 'fuel' cost difference to run a petrol car and an EV one thing we often overlook is the different tax rates applied to the two fuel methods.
Fuel duty is currently levied at a flat rate of 52.95p per litre for both petrol and diesel, while VAT at 20% is then charged on both the product price and the duty. A litre of petrol at £1.30 per litre is 57% tax, or 75p of the £1.30 is tax.
Electricity used to charge EV's does not have a fuel duty tax applied to it, but VAT is charged on electricity used to charge an EV. A VAT rate of 5% is applied for home electricity and a VAT rate of 20% (the same a petrol and diesel) is applied to public charging.
Due to the addition of fuel duty on petrol and diesel the governments tax take from petrol and diesel is quite high. The Office for Budget Responsibility state "In 2025-26, we expect fuel duties to raise £24.4 billion. That would represent 2.0 per cent of all receipts and is equivalent to £850 per household and 0.8 per cent of national income". It should be obvious that our government will need to replace the lost tax income from petrol/diesel as we move towards EV's replacing petrol and diesel vehicles.
To replace the tax from petrol and diesel we need to understand how much it equates to per mile driven. Tax on petrol and diesel in a way is a form of pay per mile as the more you drive the more petrol you buy, and therefore more tax you pay.
A petrol car with an efficiency of 50 MPG pays 6.8p per mile in tax to the government through Fuel Duty and VAT taxes. A home charged EV paying 7p/kWh currently pays 0.1p per mile in tax to the government through VAT, whilst an EV charged using a public DC rapid charger at 69p/kWh pays 3.3p per mile in tax to the government through VAT.
Whilst we can see petrol vehicles pay the most in tax per mile at present, the cost of the petrol element is a third of the electricity cost of public charging an EV at 69p/kWh. A home charged EV is the cheapest due to the low rate of VAT and low cost of electricity.
I expect in the future there will be a pay per mile system of some sort introduced, but it won't be easy to introduce such a system fairly when there are very different charging costs depending on whether an EV is charged at home or using a public charger. The reason for this is that there is a large difference in the cost of home charging and public charging an EV than there was between the price of petrol or diesel between different regions or petrol stations (unless you used a motorway petrol station). Its easy to see there could potentially be a cost split between those who have the ability to charge at home and those who don't.
What is clear though, charging an EV at home using an EV tariff (7p/kWh rate) would be 25% cheaper than fuelling a petrol car (£1.30/litre) if the tax per mile was equalised at 6.8p per mile.
Charging an EV using a public rapid charger (69p/kWh) would be much more expensive than a petrol car as it would cost double the cost per mile compared to a petrol car if tax per mile was equal at 6.8p per mile.
Hopefully we will see a decrease in the cost of public charging as the economy of scale increases as utilisation of public charging infrastructure increases as the number of EV's on UK roads increase.
I'm not sure how different tax rates will be applied to the different EV charging methods. Unlike applying on purchase at petrol stations, EV's can be charged anywhere there is a 3 pin 230V socket so it would be difficult to apply it to the cost of electricity, especially at home. The only thing I can think of is some form of 'pay per mile' tax is introduced to replicate the current fuel duty tax paid by petrol/diesel on purchase. How this could be done without introducing even more cost by creating and running a system to take the tax place is unknown at present.