Autumn Statement 2022: EV drivers to pay road tax from April 2025
Thu, 17 Nov 2022
- Electric cars owners will pay vehicle excise duty (VED) road tax from April 2025
- EVs registered on or after 1 April 2025 will pay the lowest first year rate of VED, currently £10 a year. From the second year of registration onwards, they will move to the standard £165 rate
- EVs first registered between 1 April 2017 and 31 March 2025 are also set to pay the standard rate
Electric vehicles (EVs) will no longer be exempt from vehicle excise duty (VED) road tax from April 2025, the Chancellor of the Exchequer Jeremy Hunt announced in the Autumn Statement today (17 November 2022).
The change applies to electric cars, vans and motorcycles and will "ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate", the Government said.
Currently, EVs are exempt from both the annual £165 standard rate VED and the £335 premium supplement (also known as the 'expensive car supplement') for new cars with a list price of £40,000 or more.
Under the new rules 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 of 1g/km to 50g/km) currently £10 a year.
From the second year of registration onwards, they will move to the standard £165 rate.
The Government also intends to tax older electric vehicles, with those first registered between 1 April 2017 and 31 March 2025 set to 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.
No road pricing announcement
Industry experts have long-talked about the need to fill the 'fiscal black hole' the Treasury will face as EV adoption accelerates with the ban on the sale of new petrol and diesel cars in 2030.
Latest estimates from the Office for Budget Responsibility (OBR) put this at £2.1 billion by 2026-27.
However, there was no mention of introducing a road pricing system and views are mixed about whether VED tax for EVs will hit demand, especially given the UK's rising energy costs (with the energy price cap set to rise from £2,500 from April 2023 to £3,000) and the removal of the plug-in car grant.
RAC head of policy Nicholas Lyes said: “After many years of paying no car tax at all, it’s probably fair the Government gets owners of electric vehicles to start contributing to the upkeep of major roads from 2025.
"While vehicle excise duty rates are unlikely to be a defining reason for vehicle choice, we believe a first year zero-VED rate benefit should have been retained as a partial incentive. But we don’t expect this tax change to have much of an effect on dampening the demand for electric vehicles given the many other cost benefits of running one."
However, Gill Nowell, head of electric vehicles at ElectriX, part of LV= General Insurance, expressed "disappointment" with the changes .
“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," she said.
"It is a disappointing decision but also not surprising. The Government will now need to keep a close eye on uptake 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.”
Are EVs exempt from road tax?
Electric vehicles (EVs) are currently exempt from vehicle excise duty (VED), also known as road tax, but from April 2025 the lowest first year rate of VED, currently £10 a year, will apply. From the second year of registration onwards, they will move to the standard £165 rate.
EVs first registered between 1 April 2017 and 31 March 2025 will also pay the standard £165 rate.
Does the expensive car supplement apply to EVs?
The £335 premium supplement (also known as the 'expensive car supplement') for new cars with a list price of £40,000 or more doesn't currently apply to electric vehicles.
However, this is due to end in 2025 meaning that new electric cars registered on or after 1 April 2025 will be liable.
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