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Electric cars subject to vehicle excise duty from 2024
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Vehicle duty extended to electric cars and vans


The golden age of electric vehicle incentives will dim in April 2025, when electric cars, vans and motorcycles will have to pay vehicle excise duty (VED).

17th Nov 2022
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New zero-emission cars registered on or after 1 April 2025 will be liable for a £10 payment, equivalent to the lowest first-year rate of VED  that applies to sub 50g/km emission cars. The following year, they will be subject to the standard annual duty charge, currently £165 a year.

Electric cars first registered between 1 April 2017 and 31 March 2025 will pay the standard rate from the same date. Zero-emission vans will move to the current £290 rate for petrol and diesel light goods vehicles and electric motorcycles and tricycles will have to pay the lowest VED rate, currently £22 a year.

Another concession that will go in 2025 is the exemption for electric vehicles from the annual £355 expensive car supplement (applicable for the first five years). Details of the changes are set out in paragraph 5.34 of the Autumn Statement document.

Institute of Chartered Accountants of Scotland (ICAS) head of employment/devolved taxes Justine Riccomini pointed out that as well as hitting individual electric car drivers, broadening VED will add to the costs for employers who provide electric vehicle fleets to their employees.

“Once cars shift to electric, the government will be left without the fuel duties that currently amount to £30bn per annum,” added EY family enterprise leader Tom Evennett. “Today’s announcement may be only the start of the changes that will beset the electric vehicle market as the country transitions away from fossil fuels.”

Company car tax

While campaigners moaned about the short shrift given to renewable energy generators enjoying windfall profits and electric vehicle duty, Chancellor Jeremy Hunt revealed his inner urge for balance by maintaining tax incentives for electric company car owners.

Across the board, the government is setting company car tax rates until April 2028. For company cars emitting less than 75g of CO2/km, the benefit in kind rate will stay at 2% and then go up by 1% a year from 2025–26 to a maximum of 5%.

The rates for other car types will also go up by 1% a year from 2025, but from their existing higher rates compared to electric vehicles. The percentage for low-emission cars will be capped at 21% and drivers of other vehicles will pay the tax up to 37% by 2028.

The advisory fuel rate used by employers to reimburse employees for business use of their electric car (or to calculate benefit in kind for private use) will go up from 5p to 8p from 1 December 2022 and be reviewed quarterly after that.

Fuel duty rise on the cards

The Chancellor also seems minded to turn the screw on petrol and diesel car drivers. While there was no mention of the subject during his speech or in the paperwork subsequently released by Treasury and HMRC, the Office of Budget Responsibility review published alongside the Autumn Statement referred to a “planned 23% increase in the fuel duty rate in late March 2023”. If this proposal is implemented, it would increase the cost of petrol and diesel by 12p to a litre and add £5.7bn to next year’s tax receipts. 

“This would be a record cash increase, and the first time any Government has raised fuel duty rates in cash terms since 1 January 2011,” the OBR noted.

Uncover the detail of the Autumn Statement at AccountingWEB Live Expo on 30 November - 1 December. Join tax experts Rebecca Benneyworth, Paul Aplin, Dan Neidle and more to find out what the measures really mean for you and your clients.

Replies (1)

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By Hugo Fair
18th Nov 2022 21:44

Why is anyone surprised?

The government has two related objectives ... reducing the proportion of vehicle miles using fossil fuels, and reducing the the total number of vehicle miles (to save energy consumption).
But nevertheless it needs to maintain the existing transport infrastructure (including roads, bridges, tunnels, etc).

The revenue requirements for the latter part will continue to increase each year, so a rapidly decreasing revenue stream from vehicle & fuel taxes is unsustainable.
As the move from petrol/diesel vehicles to electric (hopefully) picks up pace, it seems obvious that the slack in collecting revenue will need to be taken up by the electric ones?

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