Drivers buying an electric car rather than a petrol or diesel model will be three times more likely to be hit by the luxury car tax under new rules, figures suggest (Danny Lawson/PA) (Image: PA Archive/PA Images)
Motorists opting for (EVs) over traditional petrol or diesel cars are set to be three times more likely to be slapped with the luxury car tax under incoming regulations, according to new data.
Auto Trader, the online vehicle marketplace behind the study, has urged a delay in the revamp of (VED), warning that it could deter drivers from embracing electric motoring.
From April 1, Treasury is axing the VED exemption for EVs. This means all-electric car owners will pay at least the standard rate, which will rise to £195 from the second year after registration.
Moreover, those purchasing a vehicle from April 1 priced over £40,000 will also be hit with the costly car supplement, commonly referred to as the luxury car tax, amounting to £425 annually for years two to six after registration.
This shift was initially unveiled in November 2022 by the then-Conservative chancellor , who aimed to “make our motoring tax system fairer”.
Some drivers will face new car tax rates soon (Image: Getty)
Despite the change in government, the policy persists under Labour leadership. The high cost of producing batteries results in many EVs being pricier than their fossil fuel counterparts.
Auto Trader highlighted that 56 per cent of electric cars up to five years old listed on its platform are priced above the £40,000 threshold, compared to just 16 per cent of similarly aged petrol or diesel vehicles.
Ian Plummer, commercial director of Auto Trader, criticised policies giving consumers “additional reasons not to make the switch” to electric vehicles.
He said: “Despite the more uncertain global climate, it makes sense to delay these duty increases to ward off the risk of harming attitudes towards EVs for the sake of a marginal gain in revenues for the Treasury.
“EVs up to five years old on our site are three-and-a-half times more likely to be hit by the expensive car supplement than internal combustion engine cars in the same age range. That kind of difference is unhelpful for efforts to persuade drivers to switch.”
According to the zero-emission vehicles (Zev) mandate regulations, manufacturers must ensure that at least 28 per cent of new cars sold in the UK this year are zero-emission, which typically refers to purely electric vehicles. Data revealed that last month, pure electric cars comprised 25.3 per cent of the market share.
Those failing to comply with the mandate will face government fines unless they seek alternatives, such as purchasing credits from competitors or boosting sales later, or they’ll have to pay £15,000 for every excess polluting vehicle sold.
Currently, there’s ongoing analysis by the Government of feedback from a recent public consultation on proposed amendments to the mandate, potentially including eased penalties for manufacturers who don’t meet the requirements.
Steve Gooding, director of the RAC Foundation, has questioned the “Treasury’s logic” behind the costly car supplement changes, arguing that those shelling out over £40,000 on a vehicle can “reasonably be asked to dig a bit deeper to pay more tax”. However, he raised concerns about the impact on the used car market, where values “usually depreciates rapidly in the first couple of years”.
He warned: “The risk is that the expensive car supplement could be having an unintended and, in policy terms, perverse impact at a time when the pressure is on to promote the attractiveness of used EVs as part of the decarbonisation of motoring.”
Quentin Willson, founder of FairCharge and advisory board member of EVUK, both advocates for electric vehicles, expressed his strong opposition: “I strongly disagree with the EV expensive car supplement.
“Six hundred and twenty pounds a year to tax most EVs will discourage private buyers who get no incentive whatsoever to switch from combustion to electric.”
“Ministers say we should drive EVs, while the Treasury creates tax barriers to put us off. This isn’t intelligent policy making in action.”
A spokesperson for the Treasury said: “The shift to electric vehicles will support growth and productivity across the UK and is crucial for tackling climate change.
“Our balanced approach ensures fiscal stability during the transition to electric vehicles, including by introducing vehicle excise duty on EVs from April 2025, while maintaining targeted incentives to encourage their uptake.”