Electric car owners could face taxation from 2025

Taxes on electric car and van owners are one of the plans being considered by the chancellor as part of his fall statement, according to reports over the weekend.

The move could lead to car tax, as vehicle excise duty is commonly known, for purely electric vehicles, which are currently exempt.

Jeremy Hunt would consider how and when to introduce taxation for the greenest models on the road to close the £35 billion black hole that will arise when more drivers switch to electric cars by the end of the decade.

With the 2030 deadline for new petrol and diesel car sales looming and battery car owners currently avoiding both fuel tax and vehicle excise duty, The Telegraph.

A Whitehall source told the paper that electric vehicles would be taxed ‘at some point’, although the Treasury is still trying to understand ‘when that should be’.

With about one in six new cars bought in the UK this year being all-electric models and the ban on the sale of traditional internal combustion engines by the end of the decade, billions of pounds of annual revenue generated by drivers will quickly decline.

Because they run exclusively on electricity, battery owners only pay VAT when charging their vehicles at home (5 percent VAT) and when using public devices (20 percent VAT).

And since road tax is currently based on a car’s exhaust emissions, electric cars with no exhaust emissions are currently exempt from annual charges.

While VED is considered one of the existing benefits of switching to less polluting cars, ministers are aware that this will soon become a revenue problem as battery vehicles gain even greater market share in the coming years.

Chancellor Jeremy Hunt could reveal plans in the fall statement next month for the government to introduce taxes on electric cars by 2025 as sales continue to accelerate

With the ban on the sale of new petrol and diesel cars on the horizon by 2030, ministers are being pressured to accelerate plans to close the £35 billion a year black hole in revenue from lost fuel and vehicle excise duties.

One of the options being considered by the new chancellor to help close the projected gap in public finances, according to The Telegraph, is for EV drivers to pay VED from fiscal year 2025/26.

This could even be announced in his Fall Statement, which will be outlined in the Commons on Nov. 17.

The Whitehall source told the paper that ‘everyone knows that at some point electric vehicles will have to be subject to road tax’, but the Treasury faces the difficult decision of when to introduce it and how, without introducing cleaner ones in the short term. discourage vehicles. timeframe while trying to meet strict air pollution reduction targets.

Earlier this year, the House of Commons Transport Committee released a report urging the government to start a ‘advance conversation’ with drivers about new ways they could be taxed, as £35bn in annual revenue will be lost under the current tax rules.

Fuel tax is estimated to bring in £28bn a year, while VED brings in about £7bn annually.

The government has previously guaranteed that electric vehicles will remain VED-exempt until at least 2025, although it is increasingly likely that the Treasury will impose some form of tax on these banned cars and vans from the middle of the decade. on sales of new petrol and diesel cars in five years’ time.

The transport commission advised in February that owners of electric vehicles should pay a scheme for road pricing.

This would charge drivers per trip, based on distance travelled, length of trip and vehicle type.

It had also proposed the same plan a year earlier in April, saying it was “one of the best fiscal changes” to implement.

The latest figures show that 14.5% of all new cars sold in Britain this year are electric vehicles. In September alone, more than one in six registrations were BEVs

The transport committee has called for the introduction of a kilometer pricing scheme for EV drivers. This would be charged per trip based on distance travelled, trip duration and vehicle type

Prime Minister Rishi Sunak is believed to be a strong supporter of road pricing as he was “very interested” in introducing it as a long-term alternative to VED during his tenure as chancellor.

The February committee’s report also urged ministers to establish an arms-length body by the end of this year to recommend a new regime.

At the time of publication, a government spokesperson said it is committed to keeping the transition to electric cars “affordable for consumers.”

The Society of Motor Manufacturers recently confirmed that the millionth plug-in electric car – including both all-electric and plug-in hybrid models – had been sold in Britain in September.