Posted on 21 Nov 2022
The UK government has decided to tax new and existing electric vehicles from April 2025, as part of new Chancellor Jeremy Hunt’s plan to tackle the cost-of-living crisis and rebuild the economy, Kallanish reports.
EVs have been subject to a zero Vehicle Excise Duty (VED) rate in both the first year after registration and in subsequent years for some time. The policy has helped incentivise the switch but left a revenue gap of around £7 billion ($8.24 billion) a year on public coffers.
“The increasing popularity of EVs poses a fiscal problem for the government, given fuel duty revenues generate £28 billion a year for the Treasury,” says RAC, referring to the over 500,000 BEVs added to the UK car market since 2010.
Under the new policy, new zero-emission cars registered on or after 1 April 2025 will be liable to pay the lowest first-year rate of VED currently at £10/y. From the second year onwards, they will move to the standard rate, which is currently £165/y. Vehicles registered between 1 April 2017 and 31 March 2025 will pay the standard rate.
“Because the OBR [Office for Budget Responsibility] forecasts half of all new vehicles will be electric by 2025 to make our motoring tax system fairer I have decided that from April 2025 electric vehicles will no longer be exempt from Vehicle Excise Duty,” explains Hunt. “Company car tax rates will remain lower for electric vehicles and I have listened to industry bodies and will limit rate increases to 1% a year for three years from 2025.”
In addition, his autumn budget announcement also says that the Expensive Car Supplement exemption for EVs is due to end in 2025, so new zero-emission cars registered on or after 1 April 2025 will be liable. This tax currently applies to cars that have a list price of over £40,000 for five years. Other taxation include change in bands for zero and low-emission cars, zero-emission vans and motorcycles.
While the above changes have been anticipated by drivers and the industry, one thing that is expected to cause upset is the fact the government hasn’t changed the rate of VAT on public changepoints. Campaign group FairCharge has called on the Chancellor to reduce VAT on public charging from 20% to 5% -- the equivalent rate to domestic charging.
Simon Williams, spokesman for RAC electric vehicles, shared disappointment that the rate wasn’t brought down to the same level as domestic charging. “A third of drivers do not have access to a driveway or a garage, so will continue to be penalised not only by higher public charging prices but a higher rate of tax. Given the government has asked owners of EVs to start paying vehicle excise duty, we would have hoped there could have been a trade-off with a fairer VAT rate on public charging.”
Despite the tax changes for EVs, RAC doesn’t expect demand to be dampened “given the many other cost benefits of running one.”
Source:Kallanish
