Chancellor Jeremy Hunt has announced in his Autumn Statement that electric cars will no longer be exempt from vehicle excise duty (road tax) from April 2025.
Electric cars registered from April 2025 will pay the lowest rate of £10 in the first year, then move to the standard rate which is currently £165. The standard rate will also apply to electric vehicles first registered after April 2017.
As revenue from vehicle excise duty falls as more EVs and fewer petrol and diesel cars are being sold in the run-up to the sale of new petrol and diesel cars being banned in the UK from 2030, it’s no surprise that EVs will become ‘taxable’ as they are forecasted to make up half of new car sales by 2025.
The exemption for electric cars from the ‘expensive car supplement’ has also been removed. It means anyone buying a new car – electric or otherwise – priced at more than £40,000 will have to pay £165 in tax plus a £355 expensive car supplement every year from the second to sixth year of registration.
There’s better news for Benefit in Kind: rates for electric company cars will remain much lower than the rates for petrol and diesel cars. BIK rates for EVs are 2% in 2022/2023 and will remain at 2% until April 2025 before rising by just 1% each financial year until 2028.
Road tax and fuel duty raise £35 billion each year between them, but there was no mention about what will happen to fuel duty next year. It’s scheduled to rise each year, but has been frozen since 2011. At the Spring Statement in March, it was cut by 5p to 53p, for 12 months; the Treasury said a final decision on fuel duty would be made at the Spring Budget. It’s unlikely that a large rise in fuel duty will be palatable to petrol and diesel car drivers.