Drivers of popular models are set to see car taxes increase rapidly from April 1 with millions of motorists forced to pay new rates for the first time.
It comes as the Expensive Car Supplement is set to impact millions of electric vehicle owners for the first time as part of sweeping changes to Vehicle Excise Duty (VED) which were announced by Chancellor Rachel Reeves last year.
Electric vehicles had previously been exempt from paying the additional charge, which applies to cars with a list price exceeding £40,000.
But from April this is set to change with electric vehicles registered after this date forced to pay an additional £425 supplement for five years from the second licence period.
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From April 1 drivers will face new car tax hikes with electric vehicles paying rates for the first time
PA/GETTY/X/DVLA
However, experts have argued that this extra payment is "no longer fit for purpose" as many mid-range family EVs still exceed the £40,000 limit.
Jon Lawes, Managing Director at Novuna Vehicle Solutions, told GB News said: "Despite the fact they will no longer be exempt from VED from April, EVs still remain a very attractive option under salary sacrifice schemes, thanks to far lower Benefit-In-Kind rates than hybrid and ICE vehicles.
"Although EVs may have a higher upfront cost than their counterparts, the continuing downward trend of the cost of EVs will help absorb the VED increase."
He added that the luxury car tax "is arguably no longer fit for purpose" with the "outdated" £40,000 threshold no longer reflecting what qualifies as an expensive vehicle, particularly in the EV market.
This can be particularly problematic for the electric vehicle sector, where average prices tend to be higher than equivalent petrol or diesel models.
Lawes explained that the car tax threshold has not been adjusted for inflation or to account for the changing vehicle market over the past eight years.
According to Lawes, out of the approximately 1,000 EV models launched since 2022 across the UK, they have been priced between £25,000 and £75,000, meaning that around two-thirds will now fall into this luxury car tax category.
This means many ordinary family vehicles have been reclassified as luxury cars for tax purposes, creating an additional tax burden of £2,125 over five years for vehicles.
Fleet managers are particularly concerned as this affects a significant portion of their electric vehicle offerings, which will now be subject to extra tax burdens.
Lawes shared: "To truly support the shift to cleaner transport, we would encourage the government to reconsider the ECS threshold in the next Spring Statement to ensure the tax policy aligns with the realities of today’s EV landscape."
On top of paying the luxury car tax, electric vehicles will also pay the lowest first-year VED rate of £10, followed by the standard rate of £195 from the second year onwards.
This marks a significant shift from the current system where electric vehicles have historically been exempt from VED payments. For vehicles registered between March 1, 2001, and March 31, 2017, they will pay £20, while the £10 annual discount for hybrid and alternatively fuelled vehicles will also be removed.
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Drivers of vehicles priced at more than £40,000 will face an additional charge of £425 from April 1
GETTYThese changes are expected to help raise over £500million annually for the Government, which comes at the same time Fuel Duty payments start declining due to the frozen levy at 5p until 2026.
But despite these concerns, Novuna Vehicle Solutions found that EVs remain the most popular drivetrain choice for its customers, accounting for 80 per cent of all new car orders.
