EV drivers are facing £500 of extra cost from next year simply to keep their cars on the road.
A number of incentives designed to boost electric car ownership are coming to an end in 2025 – and that’s having an effect on insurance premiums too.
GettyEV drivers are facing over £500 of extra cost just to keep their cars on the road from next year[/caption]
EVs are currently exempt from paying Vehicle Excise Duty (VED), better known as road tax, but this will change on April 1, 2025.
Despite the deadline date, the change is no joke, immediately adding £180 to drivers’ running costs.
EVs registered between April 2017 and March 2025 will immediately pay that rate, while those registered after the deadline will pay £10 for the first year before £180 annually from the second year onwards.
The end of the exemption will also see motorists liable to pay the “expensive car supplement” charge on top of their VED, applying to all vehicles valued at over £40,000.
For the first five years after buying such a motor, Brits will be required to pay £390 per year on top of existing road tax.
At current prices, this would see the extra charge imposed on half of EVs in the UK, or around 475,000 vehicles.
The Government say that this will “ensure all drivers begin to pay a fairer tax contribution”, while the Treasury expects the tax expansion to rake in an extra £515 million in 2025-26, rising to around £1.6 billion by 2027-28.
However, there is a small loophole which means ‘early adopters’, those who bought EVs early in their development, could avoid much of the cost.
This is because EVs registered between March 2001 and March 2017 will only be moved in Band B of VED, with a current annual rate of £20.
RAC head of policy Nicholas Lyes said: “After many years of paying no car tax at all, it’s probably fair the Government gets owners of electric vehicles to start contributing to the upkeep of major roads from 2025.
“Vehicle excise duty rates are unlikely to be a defining reason for vehicle choice, so we don’t expect this tax change to have much of an effect on dampening demand for electric vehicles given the many other cost benefits of running one.”
Unfortunately, one cost which EV drivers can’t avoid comes in the form of rocketing insurance premiums.
Data from Compare The Market found that the average EV policy in November 2023 was £929.
While similar spikes have occurred in equivalent prices for diesel and petrol cars, combined with the tax rise, it could see drivers losing out on over £500 a year that they previously wouldn’t have paid.
This isn’t helped by the fact that some insurers won’t cover EVs, with one major supermarket brand pulling their policies in October.
Some motorists have seen extreme price hikes at renewal time, with one man even seeing his plan increase by £1,000 year-on-year.
Jonathan Hewett, chief executive of Thatcham Research, told The Telegraph: “As more electric vehicles come onto the road, it’s pushing the costs of repairs up. We’re still in the very early stages of having battery-powered vehicles, and the understanding isn’t up there like it is with internal combustion.
“As the insurers get more data over time and when repair methods improve, they will be able to offer more cost-effective policies.
“The reductions in fiscal benefits may well be offset by the incentive of having cheaper day-to-day running.”