Electric vehicles (EVs) in the UK will no longer be exempt from a UK tax that applies to registered vehicles using the nation’s public roads.
The move came in the UK Government’s annual ‘Autumn Statement’ which raised taxes across many areas of the economy as London struggles to balance its national finances amid a slowing economy and rising price inflation.
The tax – officially called Vehicle Excise Duty (VED) – will apply to electric vehicles from 2025. There were no further details in the announcement on how much taxation would be levied on EVs.
The move to end the exemption was widely expected, particularly as numbers of electric vehicles in use in Britain are increasing rapidly. Owners of petrol or diesel cars typically pay over £100 a year to the government in a tax that was introduced to raise finance for spending on UK road infrastructure.
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 markets.
“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 government on how to transition the market and ensure the tax framework on road users supports this objective.”
Some analysts have warned that higher taxes on electric vehicles could slow their take-up, with new petrol and diesel cars set to be banned from sale in Britain by 2030.
A more serious challenge to the UK’s Treasury department may come from fuel duty. Around half of the pump price paid for fuel by combustion engine vehicles is taken in taxation.
GlobalData analyst Pete Kelly says that with Bev sales taking off strongly in the UK and elsewhere, we have now reached the point where taking decisions on tax for EVs has become unavoidable. He also points out that in the UK, the tax take from fuel duty is more of an issue. “This year, VED is expected to bring in about £7bn in tax revenue – not a small sum. But by far the larger sum – at £28bn – comes from fuel duty, mainly for petrol and diesel consumption.”