The tax changes mean buyers of the most expensive EVs face tax bills of up to £2,125 over the next five years.
Industry experts have warned that the changes to the tax regime for EVs could slow the transition to EVs. All new EVs registered from today (1 April) will be required to pay a first-year tax rate of £10 before moving onto the standard rate of £195 per year from the second year onward.
In addition, all cars registered between 1 April 2017 and 31 March 2025 will be required to pay the standard annual rate of £195. Older EVs registered between 1 March 2001 and 31 March 2017 will now face a VED yearly charge of £20.
But it’s the end of the exemption from the ‘Expensive Car Supplement’ (ECS) that will really hit EV drivers.
From today, newly registered EVs with a list price of £40,000 or more will be subject to an additional £425 per year tax for five years, beginning in the second year of ownership. This means that an EV priced over £40,000 will cost an extra £2,125 over five years.
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‘This change risks slowing adoption at a critical time’
Chris Rosamond, current affairs and features editor at Auto Express, said: “A Freedom of Information request by Auto Express to the DVLA revealed that almost a third (31%) of cars are already subject to this already excessive additional rate of Vehicle Excise Duty (VED) levied on cars over £40,000 – and that going forward, it will hit up to 70% of new EVs sold.
“This is partly because EVs tend to be more expensive than petrol or diesel cars, but also because the luxury car tax has been set at the same rate since 2017, whereas new car prices have gone up 40% over the last decade.
“Levying what is basically a tax set on petrol cars eight years ago onto EVs today is unfair, especially when you consider the large sums involved; currently, it is £425 from years two to six, a total of £2,125 over five years. And it is not just new EVs – regardless of the price paid for a used EV, if it was originally bought for more than £40,000 (the ECS threshold) and first registered from April this year, future owners will still be liable for the charge.
“With private EV uptake already struggling and cost being one of the main deterrents for potential buyers, this change risks slowing adoption at a critical time.”
Car maker Vauxhall has cut the price of some of its EVs to below £40,000 to help drivers swerve the tax charge.
The range-topping Grandland Electric Ultimate is now priced at £39,995 (OTR), down from £40,495. Pricing for the Astra Electric Sports Tourer Ultimate has also been reduced to £39,995 from £40,695.
The move means all of the brand’s EVs, except the van-based Vivaro Life Electric, avoid the changes to VED.
Eurig Druce, managing director at Vauxhall, said: “With electric cars no longer exempt from Vehicle Excise Duty, Vauxhall is making electric mobility accessible and affordable for British drivers. The Vauxhall electric car range now sits below the £40,000 Expensive Car Supplement threshold, saving customers some £2,125 in road tax over the first few years of ownership.
“The threshold for the Expensive Car Supplement has remained at £40,000 since inception in 2017, despite subsequent high levels of inflation – if it were to have risen with inflation, it would now be around £52,000. With the average price of an EV in the UK at around £48,000, this new tax means that customers buying some of the more attainable electric cars on the market are now being penalised, whilst at the same time we are trying to move as many British motorists to electric as quickly as possible.
“The good news is that Vauxhall electric customers are below this new threshold, but we’d urge the Government to reconsider this new measure and ensure taxation policies incentivise the majority of drivers to make the shift to electric vehicles.”
