In his Autumn Statement, UK Chancellor Jeremy Hunt has revealed that zero-emission vehicles will no longer be VED exempt from April 2025
One of the selling points of electric cars has been that they are exempt from Vehicle Excise Duty (VED, otherwise known as road tax). But that is changing from April 2025, as the Government has announced that drivers will need to start paying road tax on EVs.
Chancellor Jeremy Hunt says the move is to make the motoring tax system “fairer”, while the introduction of fees to drive an electric vehicle will also help to reduce the £55bn “black hole” that the Government is facing in a future where the majority of vehicles will be electric.
At the moment, electric cars being exempt from VED represents a yearly saving of around £150 compared to a petrol or diesel car. Combustion-engined cars costing more than £40,000 are liable for an additional surcharge, bringing annual tax costs to around £500 until the car is six years old, but even the most expensive electric cars are exempt from this surcharge.
That will change in April 2025. Electric cars will be charged at the same rate as a petrol or diesel, and electric cars costing over £40,000 will be subjected to the same costly surcharge.
Electric vehicle sales are increasing at a rapid rate. Figures from the Society of Motor Manufacturers and Traders (SMMT) show that sales of new electric cars are higher than sales of new diesel cars.
The government is due to ban the sale of new petrol and diesel cars from 2030. But many will see the scrapping of road tax exemption for electric vehicles as taking away one of the plus points of electric car ownership. The plug-in car grant, which gives new-car buyers money off the cost of an EV, has also been drastically reduced in the last few years.
Elsewhere, the Chancellor’s Autumn Statement included income tax threshold freezes, which will increase taxes for many people if wages go up, and an increased tax on energy firms.