Major changes to the UK's vehicle excise duty (VED) are set to take effect on April 1, 2025, significantly impacting electric vehicle (EV) owners and potentially influencing consumer confidence in the transition to electric driving. The Treasury's decision to remove the exemption for EVs from VED means that all electric car owners will now be subject to the standard rate of £195 starting from the second year of ownership, following the initial £10 charge for new EVs registered after this date.
According to the Energy and Climate Intelligence Unit (ECIU), owners of the top 10 best-selling EVs will still find themselves benefiting from average lifetime savings of nearly £1,200 compared to petrol vehicles. This figure includes both purchase and running costs, as the cost of operating an electric vehicle remains lower than that of traditional petrol models.
The changes to VED were first announced in November 2022 under the Conservative government but are now being implemented by the Labour government. New EVs registered from April 1 will also incur an "expensive car supplement" of £425 annually for the second to sixth years if their list price exceeds £40,000. This supplement raises concerns among industry experts, who fear it may deter potential buyers from switching to electric.
Colin Walker, head of transport at the ECIU, expressed that while the zero emission vehicle (ZEV) mandate has driven competition and reduced prices, the government risks complacency by increasing running costs at a crucial time for EV adoption. He stated, "These new taxes could undermine consumer confidence and hold families back from making the move to electric driving, leaving them stuck paying a petrol premium to run more expensive combustion engine cars."
The changes do not only affect EVs. Owners of petrol and diesel vehicles, particularly those that are larger and more polluting, will also see their first-year tax rates double. For instance, a new Volkswagen Golf R petrol model will have a first-year rate of £220, with subsequent annual costs of £190.
Richard Evans from Webuyanycar advised current EV owners to re-tax their vehicles before the April 1 deadline to take advantage of tax-free motoring for another year. He noted, "If you re-tax your EV before March 31, you can enjoy another year's tax-free motoring. Since EVs are tax exempt until the end of March, renewing early costs nothing – and saves you £195."
As the new regulations come into play, it is essential for drivers to understand how these changes will affect their vehicles. For example, EVs registered before April 2017 will still enjoy a lower annual road tax rate of just £20. However, those registered between April 1, 2017, and March 31, 2025, will now be liable for the standard rate of £195.
In addition to the tax changes, there are also implications for Blue Badge holders, as Matt Fieldhouse, a car expert at Mobility in Motion, warned that an estimated 1.35 million disabled drivers relying on public charging points could be adversely affected by the new tax rules. He stated, "The introduction of this new tax for vehicles registered in the last eight years could see Blue Badge holders incorrectly paying out up to £250 million in road tax across the UK."
Fieldhouse emphasized that individuals receiving certain mobility components, such as the higher rate mobility component of Disability Living Allowance (DLA) or the enhanced rate mobility component of Personal Independence Payment (PIP), may be eligible for vehicle tax exemption. However, strict criteria apply, including the requirement that the vehicle must be registered in the name of the disabled person or their nominated driver, and it must be used exclusively for their needs.
For those looking to buy new cars, the first-year showroom tax will be calculated based on the vehicle's CO2 emissions. Cars emitting 1 to 50g/km of CO2 will see their first-year road tax increase to £110, while those in the 51-75g/km band will rise to £135. The most polluting vehicles, emitting over 255g/km, will face a staggering £5,490 tax in the first year.
As the April 1 deadline approaches, many drivers are rushing to take advantage of the remaining tax-free period for EVs. However, experts warn that those who wait until after this date will face significantly higher costs, which may deter some from making the switch to electric. The government continues to encourage the transition to electric vehicles as crucial for tackling climate change, yet the new tax structure raises questions about its effectiveness.
In summary, the upcoming changes to vehicle excise duty present both challenges and opportunities for UK drivers. While EV owners will face new costs, the potential savings over a vehicle's lifetime remain appealing. However, the government's approach may need reevaluation to ensure that it does not hinder the progress toward a greener automotive future.
