Car experts have urged the UK government to 'rethink' it 'punitive' tax on EVs, hybrids, and low-emission cars worth over £40k following a raft of changes
08:46, 13 Feb 2025
Thousands of drivers will soon lose their car tax discount ahead of a major shakeup. It comes as all Brits driving electric, zero, or low-emission cars will soon have to pay vehicle tax in the same way as those driving in petrol and diesel vehicles.
The levy exemption provided a clear incentive for purchasing cleaner vehicles, but was rescinded during Jeremy Hunt's autumn statement in 2022. The new rules, which come into effect on April 1, 2025, mean registered keepers of hybrid and alternatively fuelled vehicles (AFVs) will no longer have their £10 annual discount. Instead, hybrid drivers will have to cough up £195 per year if their car is registered on or after April 1, 2017. For older vehicles, the rate will depend on the car's fuel type and CO2 emissions. You can learn more about this here.
From April, there will also be no band A under the existing Vehicle Excise Duty (VED) system which is currently set at £0. This means any eco-friendly car registered on or after April 1, 2025, will pay the lowest first-year rate of vehicle tax set at £10. From the second tax payment onwards, you will pay the standard rate (£195).
Electric, zero or low-emission cars registered between 1 April 2017 and 31 March 2025 will be hit the hardest, having to now pay £195 a year, while Electric, zero or low-emission cars registered between 1 March 2001 and 31 March 2017 will only be moved to the first bad that has a VED of £20 a year.
EVs costing more than £40,000 (currently applies to 70 per cent of new EVs) will also lose their exemption from the 'Expensive Car Road Tax'. Paul Barker, editor of Auto Express, says this will add £410 to drivers' annual VED rate for the first five years, which is a £2,050 additional hit.
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Speaking exclusively to the Mirror, he said: "Regardless of the price paid for a used EV, the car will be liable if it was originally bought for more than £40,000 and given that just three per cent of EVs on sale in the UK are under £30,000, the vast majority are going to be caught up in this extra charge. Private and used vehicle uptake of EVs is not yet in a position to start adding cost barriers.
"Our data reveals that just 19 per cent of UK motorists are 'very likely' to buy a plug-in hybrid or fully electric vehicle; 57 per cent cite purchase cost as the main barrier while 26 per cent said running costs. It is clear to see from the latest EV registration figures that uptake of EVs is not where the government wants it to be - particularly amongst private buyers." Paul has urged the government to 'rethink' the 'punitive tax' - arguing: "If we want more people to make the switch, we should be giving them cost incentives, not barriers." Mike Thompson, COO at Leasing Options, agrees the government now needs to provide 'more support to balance these costs'.
"Greater investment in public charging infrastructure, incentives for home charging, and financial assistance for first-time EV buyers could help to ensure that the transition remains accessible and attractive to a wider range of drivers," he added. "A fair and transparent tax system, alongside continued incentives, will be key to keeping the UK on track towards a cleaner transport future.
"We encourage an open dialogue between the government, the automotive industry, and motorists to create a tax system that is fair, sustainable, and supportive of long-term EV growth. The goal should be to ensure that greener driving remains a viable and affordable option for everyone, rather than creating financial barriers that deter adoption at such a critical time."
Speaking to the Mirror, a HM Treasury spokesperson said: "The shift to electric vehicles will support growth and productivity across the UK and is crucial for tackling climate change. Our approach ensures fiscal stability while providing incentives through the tax system such as freezing Vehicle Excise Duty First Year Rates for EVs to encourage the transition to electric and zero emission vehicles."
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