The end of electric vehicle car tax exemptions from next year could kill off demand for greener cars in Britain, a new report is warning.
From April 2025, EV owners will be forced to pay Vehicle Excise Duty (VED) - or car tax - for the first time under new rules introduced by the former Tory Government.
Not only will all EV owners face first-year showroom tax on new models and a standard rate thereafter, seven in ten battery-powered models will also be stung by a premium tax of £410 levied on 'luxury' models for five years.
Car magazine Auto Express says it will 'create further cost barriers for drivers looking to transition to EVs' and called on the new Labour Government to scrap the luxury car levy for battery-powered vehicles.
In the Autumn Budget of 2022, former Chancellor Jeremy Hunt announced that electric cars will no longer be exempt from vehicle excise duty from 1 April 2025 in an effort to 'make our motoring tax system fairer', based on Government predictions that EVs would account for half of all new car registrations from next year.
However, demand for electric cars has dwindled since the 2022 announcement due to concerns about their upfront price and rapid depreciation - and both range and charge anxiety due to a underpopulated public charging network.
As such, EVs currently account for just 16.6 per cent of all registrations in the first half of 2024 - well below the 50 per cent expected by minister by next year.
Even car manufacturers have reacted to a slowdown in EV demand, not just in the UK but across Europe and globally, by delaying their plans to ditch new petrol and diesel cars for as long as possible.
And now Auto Express believes the end of excise duty exemptions could be another nail in the coffin for public appetite for EVs.
From 1 April, buyers of brand new electric cars are on course to pay £10 for first-year showroom tax, while the standard VED rate thereafter (which all other cars pay) will be £180 annually. This is based on current VED rates for 'alternative fuel vehicles', which are subject to rise in-line with RPI.
Owners of older EVs registered between 1 April 2017 and 31 March 2025 will be forced to pay the £180 standard rate from next year, while those who bought electric cars before April 2017 will be stung £20-a-year, despite being among the early adopters who shifted to greener motoring well ahead of the curve.
But what could put the brakes on demand is the 'luxury car' premium tax that will also be levied on EVs from next year.
