Major changes to Vehicle Excise Duty (VED), commonly known as car tax, will take effect this week, impacting motorists across the UK. These changes will alter how different vehicle types are taxed, particularly electric vehicles (EVs), which have enjoyed exemptions until now. Here, the PA news agency answers ten key questions regarding these updates.
What is VED?
VED is a tax levied on the ownership of a vehicle. It is mandatory for most vehicles on UK roads, with rates determined based on factors such as emissions and vehicle value.
How much is it?
The amount of VED a motorist pays depends on the vehicle’s CO2 emissions, its age, and whether it qualifies for exemptions. Generally, the more polluting a vehicle, the higher the tax.
Can you give some examples?
For instance, a new Volkswagen Golf R petrol model has a first-year rate of £220, followed by an annual charge of £190. In contrast, zero and low-emission vehicles, such as electric cars, have been exempt from VED—until now.
What is happening?
The longstanding exemption for zero and low-emission vehicles will be scrapped. This means that EV owners will now be subject to VED payments.
When does the change come into effect?
These new VED rules take effect on Tuesday.
Why is this happening?
This policy was first announced by the then-Chancellor Jeremy Hunt in November 2022 under the Conservative government. His stated aim was to create a “fairer” motoring tax system. The government argues that as more people transition to electric cars, it is necessary to ensure all road users contribute to the upkeep of infrastructure.
What impact will this have?
From now on, owners of newly registered electric vehicles will need to pay £10 in VED for the first year. After that, they will be charged the standard rate of £195 per year, bringing them in line with many petrol and diesel vehicles.
What is the expensive car supplement?
Often referred to as the “luxury car tax,” the expensive car supplement applies to vehicles with a list price exceeding £40,000. Owners of such cars are required to pay an additional annual fee for years two to six after registration.
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How does this affect EV owners?
Previously, electric vehicles were exempt from this additional charge. However, from Tuesday, any new EVs registered that cost more than £40,000 will be subject to the expensive car supplement. The amount payable will be £425 per year for five years, on top of the standard VED rate.
What are the concerns regarding this change?
Many experts warn that these changes could deter motorists from switching to electric vehicles. EVs generally cost more than their petrol and diesel counterparts, making them more susceptible to the expensive car supplement. As a result, critics argue that these new taxes could slow the adoption of electric cars at a time when the government is trying to push for greener transport solutions.
With these tax changes now in place, many motorists will need to factor in higher costs when deciding whether to purchase a new vehicle, particularly an electric one. While the government insists this is about fairness, critics warn it may have unintended consequences for the UK’s net-zero ambitions.
