Search
Close this search box.
Sign up for our weekly Newsletter

Chancellor announces VED on EVs from 2025

Introduction of VED on EVs is not expected immediately stall future uptake, but it does highlight the need for a more coherent and joined up conversation between government departments and industry bodies to simplify what is becoming an overly complicated vehicle taxation system.
Portrait
Jeremy Hunt

Share

November 17, 2022

CHANCELLOR Jeremy Hunt announced that electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”.

Presenting his much anticipated Autumn budget, the chancellor acknowledged that the UK is in recession, and things will get worse before they improve. Forecasts predict the economy will shrink by 1.4% next year.

Commenting on the Chancellor’s Autumn Statement, Karl Howkins, Managing Director of SOGO mobility, said:  “On the road the net zero, we have come a long way in a short period of time. However, we shouldn’t take this progress for granted, and the momentum is fragile. We already have anecdotal evidence that the rise in electricity prices is slowing demand for EVs, and the Chancellor’s decision to introduce vehicle road tax for EVs in 2025 and increases to company car tax, can only serve to further dampen demand.

“We are doing our bit by providing flexible access to green mobility for businesses and private motorists.  I’d like to see the government double down on the transition to net zero with more investment in charging infrastructure and greater tax breaks to boost the adoption of EVs.”

Ashley Barnett, Head of Fleet Consultancy at Lex Autolease, said: “The electric vehicle market has grown exponentially in recent years, creating a shortfall in motoring tax revenue. However, when coupled with rising vehicle and electricity prices, we must remain cautious of introducing further barriers to adoption.

“The introduction of VED on EVs won’t immediately stall future uptake, but it does highlight the need for a more coherent and joined up conversation between government departments and industry bodies to simplify what is becoming an overly complicated vehicle taxation system. Vehicle Excise Duty must operate in a fair, emissions-based way if we are going to continue to clean up the older and more polluting vehicles on the UK’s roads.”

According to the car buying service, ChooseMyCar.com the Autumn Statement includes a decision to no longer exempt EVs from the £335 “premium supplement” on new cars. That means that any person buying an EV worth £40,000 or more could have to pay a whopping £520 for road tax, despite being the greenest option.

Recent research, commissioned by ChooseMyCar.com, suggested that many UK drivers were keen to swap to EVs, due to the high cost of fuel. The study results showed that a huge amount – 42 percent – now planned to purchase an electric vehicle as their next car, despite the higher purchase costs and less availability of second hand EVs.

Age of driver also affected the results, with a sharp increase in plans for an EV in the younger demographic. UK drivers in the 18-34 year old age group felt most strongly about buying an EV, with a staggering 66 percent saying they would definitely make their next vehicle electric, while in the 35-54 year age group, 49 percent stated that an EV was their next car purchase. In the other 55 age group, only 20 percent said they would be purchasing an EV.

Founder of ChooseMyCar.com Nick Zapolski, said that the new “Tesla Tax” could put many people off buying an EV, and that it would spark concerns that the benefits of EV ownership will be eroded over time.

“While our research suggests people are interested in EV ownership, it’s undeniable that the high purchase price of new EVs – and the lack of second hand ones on the market – mean it’s out of reach for many drivers. Any new tax on them will just exacerbate this situation – and could be seen as an indication that other benefits of EV ownership are under threat.

“This new “Tesla tax” means that some people will now be paying more for their road tax than someone in an old banger, which is not in line with the Government’s green credentials. While we appreciate that the higher amount of EV drivers means a drop in road tax, this seems a huge step up and is a concerning sign as to what may lay ahead.”

John Wilmot, Chief Executive at comparison website LeaseLoco, said: “This is another kick in the teeth for electric car owners and sends out completely the wrong message. The government has ambitious Net Zero targets to meet, and putting more road blocks in the way of people early switching to electric vehicles is not the way to hit those targets.

“Plug-in grants have gone, soaring electricity prices have hiked charging costs and now for the first time EV owners will pay Vehicle Excise Duty. This decision could put the transition to electric cars back years. Where are the incentives now for car owners to early switch to an EV?

“This is an ill-thought out and ill-judged decision and could have massive repercussions for UK’s Net Zero ambitions.”

Caroline Sandall-Mansergh, Consultancy and Channels Development Manager, Alphabet GB, said: Following Jeremy Hunt’s Autumn Budget announcement today, while it is disappointing that EVs will no longer be exempt from VED after April 2025, we are pleased to see that the increase in company car tax for EVs will be incremental at 1% per year. From the BIK increase announced today, the average electric vehicle driver on a £35,000 list price at the 20% tax rate will only be paying an extra £6 a month from April 2025.

“However, such a sharp increase in VED for EVs is likely to limit uptake, particularly in light of current energy prices. We would have preferred to see the introduction of a new lower rate in order to continue to differentiate zero emissions vehicles from other vehicles.”

Paul Hollick, chair of the Association of Fleet Professionals, added: “Clearly, there is a lot to digest in the Budget but the big news from an AFP point of view are the changes to electric vehicle taxation. We have been strongly expressing that the position of EVs in the UK fleet sector remains at a relatively early stage of adoption and the increases in company car taxation, of 1% per cent year, seems well-judged to us at first glance. Crucially, they will allow fleet decision makers to plan for the second half of the decade as they continue the process of electrification.”

Got a spare 30 seconds?

 Help us to provide you with better market insight by completing a very short survey. It is anonymous and only takes 30 seconds. You will get free access to the quarterly results.

Share this article

Facebook
Twitter
LinkedIn
WhatsApp
Reddit
Email

Want more motoring news?

Sign up here for our free weekly serving of motoring.

Sign up here for our free weekly serving of motoring.

Chris Wright

Chris Wright

Chris Wright has been covering the automotive industry nationally and internationally for 30 years. Following spells with consumer titles he became News Editor of Automotive Management (AM), Editor of Automotive International, International Editor for Detroit-based Automotive News, and Editor of Dealer Update. He has also co-authored several FT Management Reports and contributes regularly to Justauto.com

Latest news

Scroll to Top