Car tax changes ‘under review’ amid calls for electric vehicles to remain exempt
Further car tax changes could be introduced in the coming years if there is enough demand from drivers, ahead of major new rules next year.
Following a price hike for most drivers at the start of April, the Government has hinted that it could introduce further changes in the future.
Electric vehicle owners are required to begin paying car tax from April 2025 in a move that is aimed at making the system of motoring taxation more fair.
From next year, drivers with an electric car will need to pay the lowest first year rate of vehicle tax, which would place them in the 1-50g/km category.
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Many drivers are still calling for EVs to remain exempt for the coming years to boost uptake
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Road users would also be required to pay the standard rate from the second tax payment onwards, with rates currently at £190, although this is likely to change in the next 12 months.
In the Government’s response to the Lords Environment and Climate Change Committee Report 2024, it agreed with recommendations calling for salary sacrifice schemes to remain and be promoted.
It stated that Benefit-in-Kind (BiK) tax rates are kept low for electric cars until April 2028, rising by one per cent per year from next year onwards.
Petrol and diesel company vehicles are already charged at much higher rates, with the most polluting cars set to be capped at 37 per cent tax by 2028.
The response to the report stated: “The Government has committed to keeping the transition to electric vehicles affordable for consumers. All taxes are kept under review.”
Data from the Government suggested that incentives like company car tax have more of an impact on drivers choosing an electric vehicle than other factors.
This includes the Plug-in Car Grant which allowed drivers to save thousands of pounds when buying a new electric vehicle, although this was cut in 2022.
Drivers may also need to pay the expensive car supplement, with many electric vehicles still costing more than £40,000.
This tax requires owners of more expensive cars to pay a £410 surcharge from the second year the car is taxed until it is six years old.
This could also increase in the next year, with the Government usually raising tax rates by the level of inflation, as was the case this past April.
There have also been calls from drivers and experts to cut the rate of VAT on public electric vehicle charging stations.
Currently, drivers are charged a 20 per cent VAT rate, compared to just five per cent for people who can charge their EVs at home using domestic electricity.
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Electric vehicles will need to pay car tax from next year onwards
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The Government said there were no plans to cut the rate of VAT, adding that it would add pressure on public finances.
At present, there are 59,590 charging devices across the UK, with 2,300 new chargers added to the Zapmap database in the last month alone.
