New car tax changes launching in two weeks will discourage people from choosing an electric vehicle, according to new research, as motorists prepare for rising costs.
From April 1, 2025, the Treasury will remove the exemption from Vehicle Excise Duty for electric cars, which will see zero emission vehicles charged for the first time.
This was outlined by former Conservative Chancellor Jeremy Hunt in 2022, who called for all motorists to pay a fair share to use the roads.
Drivers with electric vehicles will still be charged the lowest amount, but charges will rise to £195 for the second year onward after a vehicle is registered.
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Experts have urged the Chancellor to make changes to the Expensive Car Supplement
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However, experts are now warning that electric vehicle owners will be slapped with additional costs through the Expensive Car Supplement, which is also known as the “luxury car tax”.
This applies to any vehicle with a list price of more than £40,000, which the Government has admitted will “disproportionately” impact those looking to buy an electric vehicle, with costs of £425 annually for five years.
New data has found that 56 per cent of electric cars up to five years old on the Auto Trader website have a list price in excess of £40,000.
In comparison, only 16 per cent of petrol and diesel models in the same age bracket would have to pay the Expensive Car Supplement.
Ian Plummer, commercial director of Auto Trader, warned that the luxury car tax would give drivers more reasons to avoid an electric car, putting more pressure on the Government’s EV targets.
He added: “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.”
The 2024 Autumn Budget outlined that the Government would consider amending terms of the ECS, but this would only happen at a “future fiscal event”.
Experts have called for the threshold to be raised to a more appropriate rate, like £50,000. This would allow drivers of most electric vehicles to avoid the cost and keep the cost for the most expensive vehicles on the road.
Steve Gooding, director of the RAC Foundation, noted that drivers buying used cars could be caught out because the value of cars depreciates rapidly within the first few years.
He said: “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.”
Similarly, Quentin Willson, founder of FairCharge and EVUK advisory board member, said the ECS wasn’t “intelligent policy making in action”, adding that the Treasury is creating “tax barriers” to discourage people from buying an EV.
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More than half of all electric cars up to five years old online have a list price in excess of £40,000
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It comes as pressure mounts on the Government to meet electric car targets through the Zero Emission Vehicle (ZEV) mandate, which requires manufacturers to have 28 per cent of sales come from EVs.
Automakers can be slapped with fines worth £15,000 per polluting vehicle sold above the limits, unless they buy credits from other companies or make up the deficit in the following years.
The Government confirmed that it was analysing feedback on the high-profile ZEV mandate consultation and would provide a response in due course.
