Edmund King, AA president, said:
“Whilst we understand that EVs will need to be taxed, we stress
that the road to electrification must not be stalled by excessive
taxation. There is no doubt the introduction of vehicle excise
duty on EVs and making EV company cars less attractive by
increasing tax rates, will slow the road to electrification.
This may delay the environmental benefits and stall the
introduction of EVs onto the second-hand car market.
Unfortunately the Chancellor’s EV taxation actions will dim the
incentive to switch to electric vehicles.”
AA research has already shown that the surging electricity prices
are a factor in deterring or delaying over 70% of drivers from
going electric. Hence the importance of tax incentives is greater
than ever. Although disappointed that BIK rates will increase
beyond 2025, we are pleased that some certainty has been given.
The Benefit-in-Kind (BiK) incentive rates for electric cars (now
at 2%) will extend beyond 2024/25 as below.
BEV company car tax rates
24/25 - 2%
25/26 - 3%
26/27 - 4%
27/28 - 5%
The BiK incentive is not only important to company car drivers
but is also a crucial catalyst for speeding up the transition to
electric vehicles and eventually getting more EVs onto the used
car market. Analysis from BVRLA shows that 60% of salary
sacrifice users are basic rate taxpayers and hence this incentive
is importance for a wide range of drivers.
VED on EVs
Currently EVs pay no Vehicle Excise Duty (car tax). However, last
year the Treasury warned that “new sources of revenue” would be
needed as the country switches to EVs. Fuel duty and VED raise
about £35bn for the exchequer but the Office for Budget
Responsibility has forecast that the growing share of electric
car sales would cut motoring tax revenues by £2.1bn by
2026-27. The Chancellor has announced that the introduction
of excise duty for electric cars will take effect from 2025.
The AA believes that this is acceptable if other
incentives for the transition to EVs remain in place, but VED on
EVs should still be lower than for diesel or petrol vehicles
rather than at the standard rate.” *
Ends
Notes to Editors
*AUTUMN STATEMENT 2022
(publishing.service.gov.uk)
5.34 VED on Electric Vehicles (VED) - From April 2025, electric
cars, vans and motorcycles will begin to pay VED in the same way
as petrol and diesel vehicles. This will ensure that all road
users begin to pay a fair tax contribution as the take up of
electric vehicles continues to accelerate. The government will
legislate for this measure in Autumn Finance Bill 2022.
This means:
- new zero emission cars registered
on or after 1 April 2025 will be liable to pay the lowest first
year rate of VED (which applies to vehicles with CO2 emissions 1
to 50g/km) currently £10 a year. From the second year of
registration onwards, they will move to the standard rate,
currently £165 a year
- zero emission cars first registered
between 1 April 2017 and 31 March 2025 will also pay the standard
rate
- the Expensive Car Supplement
exemption for electric vehicles is due to end in 2025. New zero
emission cars registered on or after 1 April 2025 will therefore
be liable for the expensive car supplement. The Expensive Car
Supplement currently applies to cars with a list price exceeding
£40,000 for 5 years
- zero and low emission cars first
registered between 1 March 2001 and 30 March 2017 currently in
Band A will move to the Band B rate, currently £20 a year
- zero emission vans will move to the
rate for petrol and diesel light goods vehicles, currently £290 a
year for most vans
- zero emission motorcycles and
tricycles will move to the rate for the smallest engine size,
currently £22 a year
- rates for Alternative Fuel Vehicles
and hybrids will also be equalised
