Electric Car Owners will have to pay vehicle excise duty, better known as road tax, from 2025, the chancellor has announced.
Industry figures said the imposition of VED could slow the transition to electric cars.
However, drivers of conventional cars could see their running costs increasing far sooner, with a planned rise in fuel duty in March 2023 potentially adding 12p a litre to current petrol and diesel costs.
Office of Budget Responsibility (OBR) documents accompanying the autumn statement projected a £5.7bn uplift in receipts next year, assuming a rise in duty in line with inflation along with the one-year 5p cut from Rishi Sunak’s budget in March coming to an end.
Battery-electric vehicles (EVs) make up an increasing proportion of the cars on UK roads, meaning revenues to the Treasury from both VED and fuel duty are set to decline. The sale of new petrol or diesel cars will be banned in the UK from 2030.
The chancellor, Jeremy Hunt, told the Commons in his autumn statement: “Because the Office of Budget Responsibility forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then electric vehicles will no longer be exempt from vehicle excise duty.”
Some incentives would remain for businesses to transition to cleaner vehicles. Hunt said: “Company car tax rates will remain lower for electric vehicles … and I will limit rate increases to 1% a year for three years from 2025.”
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