EV road tax.

Electric cars are subject to vehicle excise duty for the first time under measures to be introduced by Jeremy Hunt, chancellor, in this month’s Autumn Statement. People briefed on Hunt’s plans said that applying road tax to electric vehicles was the first sign of a chancellor «dipping a toe in the water» to address the fall in motoring tax revenues caused by the transition to battery-powered vehicles, as their owners also avoid paying fuel duty. The introduction of excise duty, or VED, to electric cars could take effect from 2025-26, according to officials briefed on the plan. However, the Treasury declined to comment on «speculation» ahead of the November 17 fiscal statement. There is more than 1mn electric vehicle on UK roads, with annual sales rising exponentially.

Owners of most petrol and diesel cars pay £165 a year in road tax, and continuing the VED exemption for the growing fleet of electric vehicles could cost the exchequer about £1bn a year by the middle of the decade. It said the transition to electric cars would create a temporary tax vacuum equivalent to 1.5 per cent of gross domestic product by the 2040s that carbon taxes could partially replace. Earlier this year, the OBR also noted that the exchequer faced looming challenges from the growth in electric car sales, as it forecasted they would reach 59 per cent of total sales by 2027, up from 11.6 per cent last year. Ministers have provided various financial incentives to encourage drivers to buy electric cars, ranging from purchase discounts and vehicle tax breaks to generous treatment under company car schemes.

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