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Plug-in car grant reduced to £2,500 and capped at £35,000 cars

From today (18 March 2021), the government will provide grants of up to £2,500 for electric vehicles on cars priced under £35,000.

Previously, in his March 2020 Budget, Chancellor of the Exchequer Rishi Sunak confirmed that motorists buying electric cars would continue to benefit from the Plug-In Car Grant (to 2022-2023), but it would reduce from £3,500 to £3,000, and cars costing £50,000 or more would be excluded.

Green Car Guide believes this change excludes too many popular electric cars from benefiting from the grant, such as the Tesla Model 3, and is too sudden, and too soon, before mainstream consumers have adopted electric cars in significant numbers. Even the Peugeot e-2008 in Allure Premium trim, one of our favourite electric cars, which costs £35,330, is now not eligible for the grant. The Peugeot e-2008 is hardly an extravagant luxury car. It makes you wonder how the cliff edge of £35,000 was decided. Wouldn’t it best to have a sliding scale – such as £3,000 off cars less than £30,000, £2,000 off cars less than £40,000, and £1,000 off cars less than £50,000?

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Tax incentives, including favourable company car tax rates, which can save drivers over £2,000 a year, will remain in place (a pure EV will have 1% Benefit in Kind tax (BIK) in 2021-2022, and 2% BIK in 2022-2023 – and in 2023-2024 and 2024-2025).

The grant scheme for electric cars, vans and trucks has been updated to target less expensive models and reflect a greater range of affordable vehicles available, allowing the scheme’s funding to go further and help more people make the switch to an electric vehicle.

Grants will no longer be available for higher-priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.

The number of electric car models priced under £35,000 has increased by almost 50% since 2019 and more than half the models currently on the market will still be eligible for the grant, including cars such as the Hyundai Kona 39kWh and the MG ZS EV.

Nearly 11% of new cars sold in 2020 could be plugged in. This was up from just over 3% in 2019 – and battery electric car sales almost tripled over that same period.

The plug-in vehicle grant scheme was renewed last year, with £582 million of funding intended to last until 2022 to 2023.

Transport Minister Rachel Maclean said: “We want as many people as possible to be able to make the switch to electric vehicles as we look to reduce our carbon emissions, strive towards our net-zero ambitions and level up right across the UK.

The increasing choice of new vehicles, growing demand from customers and rapidly rising number of chargepoints mean that, while the level of funding remains as high as ever, given soaring demand, we are refocusing our vehicle grants on the more affordable zero emission vehicles – where most consumers will be looking and where taxpayers’ money will make more of a difference.

We will continue to review the grant as the market grows.

The plug-in car grant was introduced 10 years ago to stimulate the early market for zero emission vehicles. Since 2011, government has provided close to £1.3 billion in plug-in vehicle grant funding to bring ultra-low emission vehicles onto UK roads, supporting the purchase of more than 285,000 vehicles.

We have been clear since 2018 that we intend to reduce the plug-in car grant. We are retaining support for the switch to electric vehicles through other new investments. Today’s changes are the latest step in this.”

Generous tax incentives, including favourable company car tax rates, which can save drivers over £2,000 a year, will remain in place.

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