Why electric car owners will pay more after the chancellor's autumn budget

Zero-emission vehicles will lose their vehicle excise duty (VED) exemption from April 2025, the chancellor said today in his Autumn Budget.

Jeremy Hunt announced that he wanted to make motoring taxes "fairer" as he announced the policy in the House of Commons today.

The chancellor said it was due to forecasts that half of all new vehicles would be electric by 2025.

So what has the chancellor announced and how will it affect electric vehicle users?

What did the chancellor announce?

As part of his autumn statement, which brought in tax rises and spending cuts, Chancellor Jeremy Hunt announced a change to taxes on electric vehicles.

From April 2025, electric vehicles will no longer be exempt from vehicle excise duty (VED).

What is VED?

Vehicle excise duty (VED) is a tax levied on every vehicle on UK roads - it used to be known as road tax.

For new vehicles, the first-year rate varies according to their carbon emissions.

Under current rules, the cleanest models of vehicles pay zero VED, but the most polluting pay as much as £2,000.

A flat rate of £140 applies for subsequent years, but zero-emission vehicles have no charge.

What will change with the chancellor's announcement?

From April 2025, electric vehicles will have to pay VED - regardless of how clean they are.

It is not yet clear how much electric vehicle users will have to pay.

An additional change announced by Jeremy Hunt is that company car tax rates will remain lower for electric vehicles than traditionally fuelled vehicles, but will increase by one percentage point for three years from 2025.

Why has Mr Hunt changed vehicle tax rules?

Chancellor Jeremy Hunt said he wanted to make motoring taxes “fairer” as he revealed the policy on Thursday.

He said: “Because the OBR (Office for Budget Responsibility) forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then, electric vehicles will no longer be exempt from vehicle excise duty.”

This is partly due to the predicted rise in the number of electric vehicles on UK roads.

Sales of new petrol and diesel cars and vans in the UK will be banned from 2030 - an important policy in the country's fight against climate change.

The latest figures from the Society of Motor Manufacturers and Traders show the rapid increase in sales of new pure electric cars has slowed in recent months.

This may reflect cost of living pressures rather than a change in consumer car spending habits, however.

What do experts think of the change?

Vehicle and road experts are split on if the tax change will affect electric vehicle sales and if the policy is fair.

Nicholas Lyes, RAC head of policy, said: “After many years of paying no car tax at all, it’s probably fair the government gets owners of electric vehicles to start contributing to the upkeep of major roads from 2025.

“While vehicle excise duty rates are unlikely to be a defining reason for vehicle choice, we believe a first-year zero-VED rate benefit should have been retained as a partial incentive.

“But we don’t expect this tax change to have much of an effect on dampening the demand for electric vehicles given the many other cost benefits of running one."

However, Ian Plummer, director of automotive classified advertising company Auto Trader, disagreed and said: “The chancellor is clearly looking for revenues, but the prospect of additional running costs will drive more would-be buyers away from EVs when other incentives are being scrapped and high energy bills are eroding the advantages of going electric.

“An excise duty raid is deeply unhelpful and sends the wrong message if we’re to be serious about getting EVs into the mainstream.

“Drivers can still save £80 every 1,000 miles by going electric, but this hike takes away a big chunk of those savings.”

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know...