Chancellor announces introduction of excise duty on electric cars in Autumn Statement
Fri 18 November 2022
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The Chancellor, Jeremy Hunt, has announced that, from April 2025, electric cars, vans and motorcycles will begin to pay vehicle excise duty (VED) in the same way as petrol and diesel vehicles. The Autumn Statement also announced that car and van fuel benefit charges and van benefit charge will rise in line with inflation from 6 April 2023.
To justify the introduction of VED for electric vehicles, the Chancellor argued that the measure was being introduced because the Office for Budget Responsibility forecasts that half of all new vehicles sold in 2025 will be electric and that the change "would therefore create a fairer motoring tax system".
The measure is proposed to include vehicles registered between 1 April 2017 and 31 March 2025 and new zero emission cars registered on or after 1 April 2025. The former group will pay the standard rate of VED (currently £165 a year) and the latter group will be required to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year then the standard rate from the second year.
In addition, new zero emission cars costing more than £40,000 and registered after 1 April 2025 will also be liable for the Expensive Car Supplement and rates for alternative fuel vehicles and hybrids will be equalised.
The Autumn Statement also announced that, following discussions with industry bodies, the Government will set rates for company car tax (CCT) until April 2028.
The Chancellor said that the Government will also legislate in the Spring Finance Bill 2023 to extend the 100% First Year Allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes "to help ensure that the tax system continues to help incentivise business investment in charging infrastructure".
Electric vehicles have enjoyed significant benefit in kind (BIK) tax advantages to date. The Chancellor announced that legislation will introduce regulations in December 2022 to increase car and van fuel benefit charges and van benefit charge in line with inflation (CPI) from 6 April 2023, so significant tax-related benefits for company EV drivers will continue.
The VED changes received a mixed reaction from stakeholders with some (including the AA) fearing it could subdue electric vehicle sales, with others (including the RAC) suggesting it was anticipated and reasonable that EV drivers should contribute an increasing share of maintaining the road infrastructure.
Gerry Keaney, Chief Executive, BVRLA and a Zemo Partnership Board member said: "Benefit in Kind rates remaining fair, alongside the clarity provided by years of foresight, gives us a clear path on the road to net zero. The long-term health of the market has been boosted by today's announcement."
Ralph Palmer, Electric Fleets Lead, T&E, said: “Introducing a new tax on EVs, but no new levies on polluting vehicles, is just plain wrong. Whilst EV drivers should contribute to infrastructure and maintenance through taxes, this should be accompanied by a broader shift to more effectively tax polluting cars too, particularly at the point of purchase. Not maintaining or widening the tax differential between electric and emitting cars is a massive own goal and risks stifling the progress the UK has made on electrification.”
Andy Eastlake, Zemo's Chief Executive Officer added” There's good news and bad within this announcement. Giving longer term clarity on BIK rates (a primary stimulus for EV uptake) is essential. However ‘cliff edge’ policies such as the VED change dating back to 2017 seems anomalous and an unprecedented, retrospective application of VED. We've long called for progressive and long-term carbon-related fiscal policies, to embed the confidence needed to encourage consumers and industry to embrace the switch.”
Photo: Unsplash, Ed Harvey
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