Changes to cost electric car drivers £500 million by 2025
Owners of electric cars are set to start paying Vehicle Excise Duty (VED) from 2025, the chancellor has announced in the Autumn Statement.
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 they will move to the standard rate of VED which is currently £165 a year.
A full list of current VED rates is available here.
Already-registered pure battery-electric vehicles (BEVs) will also have to pay the standard rate from 2025.
According to The Treasury’s impact assessment this will bring in £515 million in 2025-26, £985 million in 2026-27 and £1,595 million in 2027-28.
The Treasury is also set to increase the rate of company car tax for electric vehicles.
- appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1 percentage point in 2025-26; a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars
- rates for all other vehicles bands will be increased by 1 percentage point for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28
“It shouldn’t have come as a surprise that the pump-priming holiday electric vehicles have enjoyed from vehicle excise duty would end, not least because manufacturers are still struggling to meet the demand for EVs in their showrooms.
“The wider question, though, is where exactly the Chancellor will go from here on the bigger tax question – the decline in fuel duty income as we leave the petrol and diesel era behind.
“Whilst there are only 540,000 battery-electric cars on the road in the UK at the moment, out of a total fleet of 33 million, as they become more common we predict fuel duty revenue from cars could drop by £5 billion a year by as early as 2028.”
Philip Gomm – Head of External Communications – RAC Foundation
[email protected] | 07711 776448
Notes to editors:
The RAC Foundation is a transport policy and research organisation that explores the economic, mobility, safety and environmental issues relating to roads and their users.
The Foundation publishes independent and authoritative research with which it promotes informed debate and advocates policy in the interest of the responsible motorist. All the Foundation’s work is available at: www.racfoundation.org
The Foundation is a registered charity.