BUDGET 2025: Electric vehicle road tax to be introduced
The chancellor has confirmed that the government will introduce a new tax on electric vehicles (EVs), having previously alluded to the idea by saying a “fairer” system is needed for all drivers.
According to Office for Budget Responsibility (OBR) documents, a “new mileage-based charge on electric and plug-in hybrid cars from April 2028 at around half the fuel duty rate paid by drivers of petrol cars”. This should increase vehicle excise duty receipts by “around £1.5 billion a year from 2028-29”.
Naturally, the motor industry has widely criticised the policy, saying it provides confusing messaging around the government’s ambitions to move towards net zero. EVs are already now subject to a luxury car tax, previously only for petrol and diesel cars.
Our view
EVs have been around for a long time now and it may seem fair to bring taxes in line with regular vehicles.
But we have to agree with the motor industry on this one. We are still in a period of transition where the government should be incentivising people to shift to electric cars, and removing this tax exemption is removing one clear incentive.
The government has a legally binding aim of achieving “net zero” by 2050, and while phasing out petrol and diesel cars will drive this push, incentives are still key to encouraging the shift over. This move could be a setback – but only time will tell.
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