UK to stop EV free road tax incentive by April 2025

Electric vehicles in the United Kingdom will be charged vehicle excise duty (VED) from April 1, 2025, the UK government announced in a statement.

This taxation update for the country will apply to zero emissions cars, vans and motorcycles from the date, and will apply to private owners and organisations which own EVs, it said. The move was first announced last week by UK chancellor Jeremy Hunt.

Owners of electric vehicles in the UK are currently exempt from paying VED, which according to Autocar is priced at £165 (RM905) annually. The change in VED structure means that owners of EVs first registered between April 1, 2017 and March 31, 2025 will be required to pay the standard VED rate, according to the publication.

Owners of EVs priced above £40,000 (RM219,555) in the UK will also be subject to the expensive car supplement, which charges owners an additional £355 (RM1,947) a year for five years. EVs have been previously exempt from this in the UK. Meanwhile, benefit-in-kind tax on company-registered EVs will increase to 3% in April 2025, increasing by 1% each consecutive year to 5% in 2027-2028, Autocar reported.

Naturally, this has attracted responses from associations and manufacturers’ groups in the UK. “We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced today mean electric car and van buyers – and current owners – will face a significant uplift in VED. The sting in the tail is the VED supplement which will unduly penalise these new, more expensive vehicle technologies,” said the Society of Motor Manufacturers and Traders (SMMT) CEO Mike Hawes.

“The introduction of taxes should support road transport decarbonisation, and the delivery of net zero, rather than threaten both the new and second-hand EV markets. With a ZEV mandate on the way for car and van manufacturers, we need a framework that encourages consumers and businesses to buy electric vehicles,” Hawes added.

Meanwhile, the AA in the UK stressed that the path to electrification must not be stalled by excessive taxation. “There is no doubt the introduction of vehicle excise duty on EVs and making EV company cars less attractive by increasing tax rates will slow the road to electrification,” said AA president Edmund King.

“This may delay the environmental benefits and stall the introduction of EVs onto the second-hand car market. Unfortunately, the chancellor’s EV taxation actions will dim the incentive to switch to electric vehicles,” King added.