Yesterday, Chancellor Jeremy Hunt delivered his Autumn Statement to the House of Commons against a backdrop of high inflation and pressure on public finances. Hunt announced that from 2025 new and existing electric vehicle (EV) owners will have to start paying Vehicle Excise Duty (VED).
Policy to the statement electric vehicles didn’t have to pay VED in the first year after registration and in the subsequent years for some time. This policy has helped incentivise drivers to switch to zero emissions electric vehicles, despite the higher upfront costs of purchase compared to a petrol or diesel.
Here are the main points regarding electric cars and vehicles from Hunt’s announcement:
- New zero-emission cars registered on or after 1 April 2025 will be liable to pay the lowest first-year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year
- From the second year of registration onwards, they will move to the standard rate, currently £165 a year
- Zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate
- The Expensive Car Supplement exemption for electric vehicles is due to end in 2025. New zero emission cars registered on or after 1 April 2025 will therefore be liable for the Expensive Car Supplement. The Expensive Car Supplement currently applies to cars with a list price exceeding £40,000 for five years
- Zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year
- Zero-emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans
- Zero-emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year
- Rates for Alternative Fuel Vehicles and hybrids will also be equalised
Naturally, there has been much reaction to this and we have quotes below from some of the key players in the emobility space:
Tim Slatter, Ford UK chairman, said: “With clear 2030 and 2035 targets, the UK is on track to be one of the leading G7 nations to transition to electric vehicles.
“Ford has called for the UK government to strengthen its support for the EV transition by implementing its proposed ZEV mandate in 2024, providing a clear investment signal to charging infrastructure providers to pick up the pace of roll out. With nine all-electric cars and vans in the market from 2025, Ford is all-in on the electric transition.
“Unfortunately, today’s announcement by the government to impose VED for electric vehicles from 2025 is a short-sighted move. We are still many years from the ‘tipping point’ when electric vehicles will reach cost parity with petrol and diesel vehicles.
“Until then, we should be incentivising customers to make the greener choice. This is particularly important for commercial vehicles, where take-up of electric models lags behind passenger cars.
“Commercial vehicles are driving businesses forward to a greener future. Home deliveries and other increases in urban commercial vehicle traffic also make the switch to zero-emission vans important for air quality, health and noise benefits.”
“The previous tax regime for electric cars has helped boost their adoption, and with incentives now being removed, it will likely put off some drivers. It is a disappointing decision but also not surprising.
“The Government will now need to keep a close eye on up take to make sure it isn’t hindered and this could be particularly difficult at a time when the perception of these cars is that they’re more expensive than traditional petrol and diesel ones.
“More work will also need to be done to assure drivers that, even with higher taxes, running an electric car on the whole still remains cheaper than driving a petrol or diesel one, and is also better for the environment.
James Court, EVA England CEO, said: “This tax will hit those drivers in the pocket who have done the right thing by getting an electric vehicle. No one expects to be given a free ride, but to focus tax increases on the cleanest cars is a shock and undermines the principle of polluter pays.
“If we want to gain energy independence we should be doing more to encourage people to switch to electric vehicles.”
Edmund King, AA president, said: “By making EV company cars less attractive by increasing tax rates – and simultaneously introducing Vehicle Excise Duty – the Government was “slowing the road to electrification.”
“This may delay the environmental benefits and stall the introduction of EVs onto the second-hand car market. Unfortunately, the Chancellor’s EV taxation actions will dim the incentive to switch to electric vehicles.”
Ralph Palmer, Transport & Environment electric fleets lead said: “It was clear that the current BiK rates couldn’t last forever. BEV drivers will now rightly contribute slightly more but the Treasury should have introduced bigger increases across the board, including for BEVs, while maintaining or strengthening the difference in tax levels compared to other vehicle types.”
Mike Hawes, SMMT Chief Executive, said: “We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced today mean electric car and van buyers – and current owners – will face a significant uplift in VED.
“The sting in the tail is the VED supplement which will unduly penalise these new, more expensive vehicle technologies. The introduction of taxes should support road transport decarbonisation, and the delivery of net zero, rather than threaten both the new and second-hand EV market.
“With a ZEV mandate on the way for car and van manufacturers, we need a framework that encourages consumers and businesses to buy electric vehicles. We look forward to working with the government on how to transition the market and ensure the tax framework on road users supports this objective.”
Gill Nowell, Head of Electric Vehicles at ElectriX LV= General Insurance, said: “The previous tax regime for electric cars has helped boost their adoption and, with incentives now being removed, it will likely put off some drivers. It is a disappointing decision but also not surprising.
“The Government will now need to keep a close eye on up take to make sure it isn’t hindered and this could be particularly difficult at a time when the perception of these cars is that they’re more expensive than traditional petrol and diesel ones.
“More work will also need to be done to assure drivers that, even with higher taxes, running an electric car on the whole still remains cheaper than driving a petrol or diesel one, and is also better for the environment.”
Toby Kernon, Wagonex CEO, said: “The implementation of an electric vehicle (EV) road tax to fill a shortfall in budgets is a significant ‘own goal’ by the government. The UK has specific, ambitious targets to reach net zero, which we are already struggling to meet, so to start taxing EVs will only add to this burden, and more worryingly, could be a sign of things to come.
“With the sale of new petrol and diesel cars ending by 2030, EVs and hybrid cars are the future of motoring. Ownership of EVs across the UK has increased exponentially in recent years and there are now more than one million EVs on the roads. While they’re often more expensive to buy than many diesel or petrol cars, the running costs are generally lower. So, adding tax to these vehicles could be a deterrent to future growth.
“However, if increased running costs are a concern for UK motorists, one alternative way to own a car is a subscription model which provides a way for UK drivers to trial an electric car on a short-term basis. This way, drivers can also minimise additional costs of owning a car such as insurance, repairs, maintenance – and tax increases – as they’re all included in the monthly fee.”
