New UK car tax law to make petrol, diesel, hybrid, electric drivers 'equal'

Electric car owners will need to pay the lowest rate of VED from next year amid a push for net-zero, with a gradual shift away from petrol and diesel.

Drivers face "counterproductive" new tax laws on their cars - and motorists "won't favour" them. Electric car owners will need to pay the lowest rate of VED from next year amid a push for net-zero, with a gradual shift away from petrol and diesel.

Chancellor Jeremy Hunt said a "fairer system of taxation" was needed from 2025. From April 1 next year, EVs will need to pay the lowest first year rate of vehicle tax and the standard rate from the second tax payment onwards, which is £190 as it stands.

The sum could rise by 2025. Matthew Walters, head of consultancy services and customer value at ALD Automotive | LeasePlan UK, warned: “Although it was inevitable that electric cars would pay VED eventually, the blanket approach announced in the 2022 Autumn Statement introduces unnecessary penalties compared to some petrol and diesel models.

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"While zero-emission vehicles continue to be exempt from VED, there will be an increase the following year with rates set to be equalised across petrol, diesel, hybrid and electric cars, including the expensive car supplement – currently £390 – for vehicles priced over £40,000."

Walters continued, saying: "This appears to be a counterproductive strategy from the Government if the aim is to encourage a transition to EVs, with all drivers facing price rises across the board. With an election date looming, drivers need assurance and certainty from the Government and raising car tax seems to be a penalty motorists aren’t going to favour.”

"Because the Office of Budget Responsibility forecasts 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," Mr Hunt said.

The Expensive Car Supplement for EVs will also be scrapped come 2025, impacting models listed above £40,000.