A new report has warned that the termination of electric vehicle (EV) car tax exemptions from next year could potentially dampen demand for eco-friendly vehicles in the UK. Starting April 2025, EV owners will be required to pay Vehicle Excise Duty (VED), also known as car tax, for the first time due to regulations introduced by the previous Conservative Government. Not only will all EV owners face a first-year showroom tax on new models and a standard rate thereafter, but seven out of ten battery-powered models will also be hit with a premium tax of £410 imposed on 'luxury' models for five years.
Auto Express magazine has claimed this will 'create further cost barriers for drivers looking to transition to EVs' and has urged the new Labour Government to abolish the luxury car levy for battery-powered vehicles. In the Autumn Budget of 2022, former Chancellor Jeremy Hunt declared that electric cars would no longer be exempt from vehicle excise duty from 1 April 2025 in an attempt to 'make our motoring tax system fairer', based on Government forecasts that EVs would represent half of all new car registrations from next year. However, since the 2022 announcement, demand for electric cars has waned due to worries about their initial cost and rapid depreciation - and both range and charge anxiety due to a sparse public charging network.
As a result, EVs currently make up just 16.6 per cent of all registrations in the first half of 2024 - significantly below the 50 per cent predicte.