The UK chancellor has declared that EV drivers would be required to pay vehicle excise charges, sometimes known as road tax, beginning in 2025.

Trigger Factor

In a report by The Guardian, the rising share of battery-electric cars on UK roads was expected to reduce taxable income to the Treasury. In 2030, the UK will no longer permit the sale of new gasoline or diesel automobiles.

It has been speculated that the higher tax rate on EVs may hinder their widespread adoption.

In his autumn statement via The Guardian, Chancellor Jeremy Hunt told the House of Commons, "Because the Office of Budget Responsibility forecast 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."

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What to Expect

Vehicle Excise Duty (VED) rates vary, depending on factors including emissions and vehicle age. 

The Guardian reported that electric cars would initially be subject to the lowest rate band for new units, which is currently £10 (around $12), for the first year of ownership. After that, they will pay the same rate as all other vehicles. 

New diesel or gasoline vehicle drivers should expect to spend between £120 ($142) and £945 ($1,116) in the first year, followed by an annual average of £165 ($195) for the subsequent five years. 

The new e-cars may be subject to an extra fee since they are more costly.

Nonetheless, certain incentives would be maintained to help companies switch to cleaner cars. 

Hunt said, "Company car tax rates will remain lower for electric vehicles ... and I will limit rate increases to 1% a year for three years from 2025."

Initial Response

According to The Guardian, Auto Trader's director Ian Plummer stated that the possibility of increased operating expenses might push many would-be purchasers away from EVs when other incentives are being withdrawn and high energy bills are diminishing the benefits of adopting electric.

Head of EV Communications at ElectriX Gill Nowell called the ruling disappointing but not unexpected. 

She added that more effort would need to be made to ensure drivers that operating an e-car stays less expensive than driving a petrol or diesel one and is also more environmentally friendly.

Many automotive groups believe that a road pricing system, in which drivers are paid a fee based on how far they drive, is the best long-term alternative. But this idea has a long history of being politically divisive.

Despite much anticipation, Hunt did not reveal any plans for a comprehensive reform of fuel duty. 

The move to autonomous cars is expected to significantly reduce the £35 billion (approximately $41 billion) in driving taxes collected annually by the Treasury. Thus, new income streams are required, said the officials. 

Also Read: EVs Used in Mining? New Contract to Reduce Jansen Potash Project's Carbon Emissions in Half

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Written by Trisha Kae Andrada