Drivers could see car tax increase by £600 amid nationwide bid to ‘alter structure’
Electric cars will be taxed £10 in the first year
PA
The DVLA has issued a stark warning to electric vehicle owners about impending tax hikes set to take effect on April 1, 2025.
These changes could see many motorists face an annual tax bill increase of £600 to drive in the UK.
The tax hikes coming next year are due to electric cars beginning to pay Vehicle Excise Duty for the first time.
Before then, EVs have been exempt from the tax measures but in a bid to level the playing field with petrol and diesel counterparts, the previous Conservative administration introduced the new levy in the Spring Budget.
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The DVLA to raise VED rates next yearPATax expert Andy Wood from Tax Natives said: "Starting in 2025, all electric vehicles priced over £40,000 will incur a new surcharge, fundamentally altering the current tax structure."
This shift marks a significant departure from the current zero-rated VED enjoyed by many EV owners, a policy initially designed to encourage the adoption of greener transport options.
Wood noted that rising car prices have pushed a substantial number of EV models into the luxury tax category, defined by a price exceeding £40,000. But this pricing comes with an additional tax burden.
The DVLA detailed: "For new electric vehicles with a list price exceeding £40,000, you will now need to pay the expensive car supplement from the second tax payment onwards. This applies to vehicles registered on or after April 1, 2025."
Wood added: "Any electric or low-emission vehicle registered after April 1, 2025, will incur the lowest first-year rate of vehicle tax, applicable to those with CO2 emissions between 1 and 50 g/km.
"After the first payment, these vehicles will transition to a standard annual rate of £190, although this may change in 2025."
The £600 charge combines this standard rate with an additional £410 surcharge for vehicles over £40,000.
Wood warned that the average price of new EVs is now around £40,000, compared to £30,000 for traditional vehicles, more than half of newly registered EVs will be affected by this increase.
Hybrid and alternatively fuelled vehicles will also face changes as they lose their £10 tax discount.
Wood commented: "For consumers who opted for electric vehicles to reduce their environmental impact and benefit from tax advantages, these new charges will present a significant financial shift."
This change could also alter the financial calculus for many considering an EV purchase and could impact the Government's ambition to reach net zero by 2050.
Under this plan, the UK would need to have 22 per cent of new car sales electric by the end of the year with the aim for 100 per cent of new sales by 2030.
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Electric cars were exempt from VED as part of an incentive to get drivers to buy them
GETTYWith more EVs surpassing the £40,000 threshold, the landscape for electric vehicle ownership is set to become considerably more complex.
Potential buyers will need to factor in these new tax costs when evaluating the long-term affordability of electric vehicles.
These tax changes mark a significant shift in the UK's approach to encouraging EV adoption.
Motorists considering an EV purchase will also need to carefully weigh the environmental benefits against potentially higher tax costs, Wood remarked.
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