1:44 pm, November 18, 2022
[First published: November 18, 08:26 / Updated: November 18, 13:44]
The car industry has issued a mixed reaction to news the government will start charging electric cars road tax from April 2025.
In his Autumn Statement yesterday, Chancellor Jeremy Hunt said he planned to make the UK’s motoring tax ‘fairer’ as half of all new cars sold are due to be fully electric by 2025.
The change means those buying a new zero-emission car on or after April 1, 2025, will have to pay the lowest first-year rate of VED at £10 a year.
After that, EVs will be charged the same as petrol and diesel vehicles with a standard rate of £165 per year.
Additionally, electric cars costing more than £40k will also be forced to pay the extra annual charge, which currently stands at £310 on top of the £165 every year, for five years after first registration.
Previously electric cars were exempt.
Neil McCue, director of Snows Motor Group, said he thinks the changes will make little difference to electric car buyers.
Snows represents 20 brands including many with large electric car offerings including BMW, Mini, Kia and Volvo.
‘Honestly, I was surprised it was put off to 2025 – the chancellor should have done it now,’ McCue told Car Dealer.
‘If you’re buying a £120k electric iX or Porsche Taycan, you should be paying road tax. You can afford it. It won’t put buyers off at all, in fact, I don’t think they’ll even notice it.
‘If you’re on the EV journey, paying road tax the same as you were on your combustion engined car you’re swapping out of really will make no difference to whether you’re going to buy it or not.’
Chris Wiseman, MD of Wessex Garages, which represents Mazda, Nissan, Kia, Hyundai and the new electric car brand Ora, said he thinks the biggest barrier for EV buyers is the up front cost.
‘I don’t think the tax will be the problem, it’s the cost of entry that is,’ he said.
‘When there’s a £20k electric car that’s when things will really take off. The entry price is far more important than car tax.’
Industry experts, though, warned the changes could disincentivize new car buyers at a time the market is heading towards a full combustion engine ban by 2030.
SMMT chief executive Mike Hawes said the UK needs a ‘framework to encourage consumers and businesses to buy EVs’.
He said: ‘We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced 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.’
The tax changes drag in electric cars already in the market into paying road tax with cars registered after April 1, 2017 also liable to the annual fee.
Hugo Griffiths, consumer editor at Carwow, said he accepted the government was ‘caught in a trap’, but is concerned about dragging used EV owners into paying tax too.
‘There is a nasty surprise lurking around the corner for existing EV owners as it’s not just new EVs that will have to pay road tax from 2025,’ he explained.
‘Given changes to road tax regimes tend not to be retrospective, not honouring the system that was in place when older cars were purchased, seems rather unfair.’
Philip Nothard, chair of the Vehicle Remarketing Association and used car expert, said demand for EVs in the used market was already ‘volatile’.
‘Their low running costs are a key attractor for consumers, so this is probably a retrograde move,’ he warned.
Some fear the changes could put buyers off electric cars at a time when the technology needs to be promoted.
Electric cars are traditionally more expensive to buy and there are still major issues with charging infrastructure across the UK.
Ian Plummer, Auto Trader commercial director, said: ‘The prospect of increased running costs will drive more would-be buyers away from EVs when other incentives are being scrapped and high energy bills are eroding the advantages of going electric.’
Lisa Watson, director of sales at Close Brothers Motor Finance, agrees and fears the government’s 2030 target could now be out of reach.
‘This will make already hesitant consumers less likely to make the shift towards alternative fuel vehicles,’ she said.
‘That, coupled with the ever-increasing costs of electricity and a public charging infrastructure roll-out running at a fraction of the speed of electric vehicle adoption, means an already challenging target is looking unachievable.’
Edmund King, AA president, said he also thinks the changes will ‘slow the road to electrification’.
He said: ‘Unfortunately the chancellor’s EV taxation actions will dim the incentive to switch to electric vehicles.
‘Whilst we understand that EVs will need to be taxed, we stress that the road to electrification must not be stalled by excessive taxation.’
However, What Car? research shows that EV buyers are actually in favour of paying their fare share of road tax.
Editorial director Jim Holder said that a study he carried out of 1,140 car buyers revealed just 14.6 per cent were in favour of EVs keeping their tax free status.
In fact, 45 per cent wanted to see EVs taxed now.
Holder was more worried about the rise in the energy price cap from £2,500 per year to £3,000 in April.
He said: ‘An unintended consequence of raising the average household energy price cap is that electric vehicle sales in the UK will decline, though nowhere near as much as if no price cap was present.
‘Previous research by What Car? found the government’s previous announcement to scrap the £2,500 two-year energy price cap resulted in 24.4 per cent of buyers shunning electric vehicles due to the likelihood of higher electricity prices in the future.’
John Wilmot, CEO of car leasing comparison website LeaseLoco, branded the changes a ‘kick in the teeth’ for EV owners and said they were now a ‘road block’ for people considering switching.
Ashley Barnett, of Lex Autolease, wants to see a ‘joined up conversation’ between the government and the car industry to simplify the ‘overly complicated’ car tax 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,’ added Barnett.
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