Autumn budget 2022: The government has announced that electric cars, vans and motorcycles will be required to pay vehicle excise duty (VED) from April 2025.
According to Chancellor Jeremy Hunt, this will ensure a fairer tax contribution as the take up of electric vehicles continues to accelerate. The government will legislate for this measure in the upcoming Autumn Finance Bill 2022.
New zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED, which applies to vehicles with CO2 emissions one to 50g per kilometre standing at £10 a year. From the second year of registration onwards, they will move to the standard rate, which is currently £165 a year. Zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate.
Zero and low emission cars registered between 1 March 2001 and 30 March 2017 currently in band A will move to the band B rate, which is £20 a year, and zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently standing at £290 a year.
Meanwhile, zero emission motorcycles and tricycles will move to the rate for the smallest engine size, which is £22 a year, and rates for Alternative Fuel Vehicles and hybrids will also be equalised.
Additionally, the expensive car supplement exemption, which currently applies to cars with a list price exceeding £40,000 for five years, for electric vehicles is due to end in 2025, with new zero emission cars registered on or after 1 April 2025 liable for this.
Hunt said: “Going forward, the fairest way to restore the public finances is to ask everyone to contribute a little. The tax system should continue to adapt to reflect consumer behaviour. This will ensure that all motorists begin to pay a fairer tax contribution.”