Seven in 10 British drivers will be forced to pay additional tax on their vehicle from next year when new rules come into force, according to new research.
The so-called ‘luxury’ car tax for vehicles priced at more than £40,000 will impact at least 70 per cent of electric cars starting next year. The new report has warned that the termination of electric vehicle (EV) car tax exemptions from next year could potentially dampen demand for eco-friendly vehicles in the UK.
Starting April 2025, EV owners will be required to pay Vehicle Excise Duty (VED), also known as car tax, for the first time due to regulations introduced by the previous Conservative government. Not only will all EV owners face a first-year showroom tax on new models and a standard rate after, but seven out of ten battery-powered models will also be hit with a tax of £410 imposed on ‘luxury’ models for five years.
Auto Express magazine has claimed this will ‘create further cost barriers for drivers looking to transition to EVs’ and has urged the new government to abolish the luxury car levy for battery-powered vehicles. The tax changes mean electric cars that were previously exempt from paying the Expensive Car Supplement will now be in line with both petrol and diesel models.
Paul Barker, editor at Auto Express, explained that regardless of the price paid for a used EV, the car will be liable if it was originally bought for more than £40,000. He warned: “The vast majority are going to be caught up in this extra charge. Some used EV buyers may not even know about the extra £410 a year cost until they go to tax their vehicles.
“Private and used vehicle uptake of EVs is not yet in a position to start adding cost barriers; more needs to be done to encourage drivers to move to this still-fledgling technology, not give another reason to hold off from making the shift.”
Barker added: “There are currently too many reasons for drivers to not make the switch, and this is yet another to add to the list.”
According to Birmingham Mail, DVLA data shows that almost 31 per cent of UK vehicles were already subject to the fee, which requires owners to pay £410 per year in Vehicle Excise Duty (VED). Electric vehicles were previously exempt but that will change on April 1, 2025. The new tax measures come as EVs registered between April 1, 2017, and March 31, 2025, will be liable to pay the current standard VED rate of £190.
Telsa, one of the best-selling electric car brands in the UK, only has one model that falls short of the tax, whereas the likes of Ford and Toyota have none.