The Labour Government may reconsider the Expensive Car Supplement on electric vehicles introduced just months ago in April.
The tax applies to all electric cars priced above £40,000, adding £425 annually to ownership costs for years two through six after registration.
Industry critics warn this additional expense will undermine EV adoption efforts. A leaked letter now suggests the Government might adjust the threshold.
The correspondence from Lilian Greenwood, minister for the future of roads, obtained by Autocar, acknowledges concerns about the tax impact on electric vehicles.
“As announced at Autumn Budget 2024, the Government recognises the disproportionate impact of the current VED Expensive Car Supplement threshold for those purchasing zero emission cars from 1 April 2025,” Greenwood wrote.
“We will consider raising the threshold for zero-emission cars only at a future fiscal event to make it easier to buy electric cars.”
The Expensive Car Supplement has existed since 2017, but zero-emissions vehicles were exempt until April 2025. Under the current system, EV owners with cars priced over £40,000 now face a total cost increase of £3,110 over six years when combined with standard VED charges.
Raising the threshold would reduce EV running costs at a critical time when the Government faces pressure to provide incentives supporting its electric vehicle transition goals.
Car manufacturers are expected to reach 28% pure-electric sales mix by year-end, with current EV registrations at 20.4% of the market.
Several manufacturers have already reduced prices to position their models below the £40,000 threshold. However, industry representatives maintain government action remains necessary to accelerate EV adoption, despite monthly increases in registration numbers.
While Greenwood’s letter hints at potential relief, the timing remains unclear. It doesn’t specify whether concrete plans exist for the Autumn Budget or if the threshold adjustment remains under consideration for an unspecified future announcement.
