The UK Chancellor of the Exchequer, Rachel Reeves, is being asked to consider cancelling plans for a luxury car tax on electric vehicles.
This is due to concerns that such a levy would make EVs unaffordable for most, undermining attempts to reach the government’s net-zero targets.
A new tax
EVs registered from 1 April 2025 will incur an additional tax (the “Expensive Car Supplement”) if they cost over £40,000.
The previous UK government, led by the Conservative Party, initially floated plans to include EVs in the Expensive Car Supplement despite being exempt since 2020. The Labour Party, which took over in July, is following through on these plans.
Research from the Society of Motor Manufacturers and Traders (SMMT) shows that EVs usually cost over a third more than regular vehicles, resulting in about 70% of new EVs being subject to tax in comparison to 19% of petrol and diesel.
This will significantly impact a large number of drivers in the UK, with the SMMT noting that in 2024 alone 300,000 EVs have been bought in the nation.
Drivers subject to this levy will pay £425 per annum for five years – during the second and sixth years of the car’s lifespan.
Overall, this will cost drivers over £2,000 – including if the car has a new owner in that period.
Stuart Masson, editor of The Car Expert UK, warned: “We need lower-income drivers to have access to EVs – you have to democratise… The £40,000 cut-off includes many, many EVs, but there will also be cheaper diesel vehicles not paying it.”
Meanwhile, a Treasury spokesperson added: “We want to ensure electric vehicles are affordable which is why, to help keep costs down, we announced at the Budget that we will consider raising the threshold at which electric vehicles pay the Expensive Car Supplement.”
Ongoing concerns
The news comes amidst other concerns regarding the government’s support for the zero-emission vehicle transition.
November 2024 saw car giant Stellantis announce plans to close its factory in Luton, citing the UK’s EV mandate as the driving force behind the decision.
While SMMT warned that a fast-paced transition could hurt manufacturers if demand “failed to meet ambition”, Ford UK called for government incentives to help stimulate EV demand – increasing the chance of meeting transition targets.
This series covers the developing electric vehicles market of the UK and its increasing infrastructure, as the nation advances its net-zero goals. For all things EV, don’t miss out on your free ticket to EVCharge Live UK – taking place 23-25 September 2025.
