UK to drop EV tax exemption in 2025

Great Britain is abolishing the vehicle tax exemption for electric vehicles. As announced by the British Ministry of Finance, from 1 April 2025, the so-called Vehicle Excise Duty (VED) must also be paid for electric cars, vans and motorbikes – but initially at a manageable rate.

In the first year, the lowest VED rate, currently 10 pounds per year, will apply to electric cars. From the second year, the standard rate of currently 165 pounds per year applies. Electric cars first registered between 1 April 2017 and 31 March 2025 will also be charged the standard rate.

Currently, electric cars are also exempt from the “expensive car supplement”. Under this scheme, owners of cars costing more than £40,000 are charged £355 per year for five years. This exemption is also due to end on 1 April 2025, so electric cars over £40,000 will be charged again.

Electric transporters will move to the rate for petrol and diesel light commercial vehicles, which is currently £290 for most vans. Electric motorbikes and three-wheelers will be switched to the rate for the smallest engine size, currently £22 per year.

In terms of company car taxation, the “benefit-in-kind” tax, which in German is effectively equivalent to imputed income, will be gradually increased for electric vehicles by up to 5 percentage points from 2027.

As the Chancellor of the Exchequer, Jeremy Hunt, announced, the new regulation will make the vehicle tax system “fairer”. His Treasury added that with the change “all motorists will start paying their fair share”. However, they underline that this is not a departure from eMobility support: government support for charging infrastructure, for example, is to continue.

While the Society of Motor Manufacturers says it recognises that all vehicle owners should pay their fair share of tax, it criticises the fact that the scheme is intended to affect not only new registrations but also existing vehicles – which now face a significant increase in costs.

“This may delay the environmental benefits and stall the introduction of EVs onto the second-hand car market. Unfortunately, the chancellor’s EV taxation actions will dim the incentive to switch to electric vehicles,” said Edmund King, AA president.

In an initial statement, the RAC Motoring Group does not expect the new vehicle tax regulation to lead to a drop in demand for electric cars, as “the many other cost benefits of operating an electric vehicle” will remain.

autocar.co.uk, bbc.com, gov.uk (page 52)