Four in five drivers face having to pay 'surcharge' on top of car tax in April

Government and Chancellor Rachel Reeves is being urged to change the threshold for a new tax on electric vehicles (EVs) due to take effect from April.

Four-in-five electric vehicles will be liable to pay a £425 VED surcharge from April. The Labour Party government and Chancellor Rachel Reeves is being urged to change the threshold for a new tax on electric vehicles (EVs) due to take effect from April.

A surcharge on VED, the expensive car allowance also dubbed the luxury car tax was introduced in 2017, for all new, internal combustion engine (ICE) vehicles costing more than £40,000. In 2022, the then Chancellor, former Conservative Party MP Jeremy Hunt, announced it would also apply to EVs, including plug-in hybrids (PHEVs), from April 2025.

It currently costs £410 and is paid annually for five years starting from the first standard VED payment that is made when the car is a year old. It is set to rise to £425 from April. Speaking to Fleet News, Caroline Sandell Mansergh spoke out.

READ MORE Six counties in England set to see NO more snow for rest of winter

Caroline said: “We could see really important EVs start to fall out of grade and, because we still don’t have enough EVs at the cheaper end of the scale, you’re then putting immediate pressure on the more populous grades within fleets.

“The trouble is most companies are not going to be in a position to uplift grade allowances by £20 or £30 pounds a month, because everybody is in fairly sharp cost control measures.” And Caroline added: “There will be cheaper EVs coming this year and next, and we will start to see more of a balance, and be in a position where we can directly compare all vehicles of all fuel and energy types.”

“But right now, we cannot do that. They are very, very different, and keeping it at £40,000 is harming the market at a time when we need as many measures to keep drawing people into EVs.” Just one in five zero-emission cars (19%) currently costs less than £40,000, according to new analysis.