Electric vehicles (EVs) sold in the UK will be subject to vehicle exercise duty from April 2025 as part of chancellor Jeremy Hunt’s autumn statement, one of the elements that received a quick backlash.
The benefit-in-kind rates will also increase for electric company cars from the same date, resulting in an additional 1% per year to 2027/28.
Hunt said it would “ensure that all motorists begin to pay a fairer tax contribution,” after the “success of the transition to electric cars,” suggesting the UK has reached a point where it no longer needed to incentivise EV use.
Reaction to the announcement has been far less generous, however.
While the tax could raise over £1.8bn between 2027 to 2028 for the government, it potentially threatens to deter people from buying electric cars, said Tom Evennett of accountant Ernest & Young.
He added that it was notable the chancellor failed to address the “elephant in the room,” that “once cars shift to electric, the government will be left without the fuel duties that currently amount to £30bn per annum.”
With this in mind, Evennett outlined: “Today’s announcement may be only the start of the changes that will beset the electric vehicle market”.
Mike Hawes, chief executive of the motor manufacturers' organisation, the SMMT, said buyers of EV and current owners will face a "significant uplift", with a "sting in the tail" that the VED supplement 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," Hawes added.
David Borland, head of automotive at EY, widely agreed, commenting: “Along with the higher list price of EVs … concerns on charging infrastructure all in the middle of a cost of living crisis, consumers may be reluctant to transition to a greener car fleet.”
On a slightly lighter note, Borland suggested short term demand for EVs may increase, but “but whether manufacturers that are already struggling with order backlogs can fulfil any demand remains to be seen”.