News analysis EV tax changes ‘threaten corporate adoption’


Changes to VED due to come into force from April may be badly timed in view of electrification targets, it has been said. Sean Keywood reports.


he pending end of VED exemption for EVs could make the vehicles less appealing to the corporate sector which has formed the backbone of UK new car market electrification in recent years. That’s according to Jon Lawes, managing director of leasing company Novuna Vehicle Solutions, commenting ahead of tax changes coming into force from April.


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The changes include first-year VED rates for EVs being increased from zero to £10, while second-year rates will go up from zero to £195.


In addition, EVs registered from 1 April which cost more than £40,000 will become eligible for the ‘expensive car supplement’ previously only applied to ICE models, meaning an extra £425 payment for each of the second to the fifth years of the car’s life. Lawes said the added costs “could erode the tax advantages driving corporate adoption – particularly via salary sacrifice schemes”.


He continued: “With the 2030 ban on new petrol and diesel cars looming, concerns are mounting over future tax rises, complicating long-term fleet planning. Manufacturers, reliant on incentives to meet ZEV mandate targets, now face an unpredictable landscape. “Combined with geopolitical instability, this could strain supply chains and push prices higher, dampening momentum just as the sector needs acceleration.” Lawes’ comments follow publication of UK new car market data for February, which saw EV registrations up by 41.7% year on year. However, the Society of Motor Manufacturers and Traders (SMMT), which published the data, suggested this surge in demand was from buyers looking to beat the April tax rises. The organisation’s chief executive, Mike Hawes, suggested that a similar picture was expected during


8 | March/April 2025 | www.businesscar.co.uk


March, and added: “Long term, EV consumers need carrots, not ever more sticks.”


Despite the February EV registrations uptick, the vehicles’ market share during the month of 25.3% was still behind the level required by the UK Government’s ZEV mandate.


The comments around the February registrations data followed on from a warning issued by the Association of Fleet Professionals (AFP) that many fleets were unaware of the April increases – which also include a VED rise from zero to £110 for plug-in hybrids emitting between 1-50g/km of CO2.


AFP director James Pestell said: “The feedback we are receiving is that many fleets simply haven’t appreciated and accounted for these increases, which are substantial when applied across entire fleets operating dozens, hundreds or thousands of EVs and PHEVs.


“From April onwards, they’ll be receiving bills from the DVLA or shortfall invoices from their leasing supplier, and won’t have factored them into their running costs.


“Electric cars costing over £40,000 bought after the start of April – including some of the most common models on fleets – that would have attracted no tax in 2024-25 will be liable for £2,490 during the first five years of their life. That’s a big increase.” Speaking separately, during a Westminster Energy, Environment and Transport Forum policy conference discussing the next steps for zero-emission vehicles in England, Scotland and Wales, Auto Trader commercial director Ian Plummer suggested that the potential effects on electric vehicle demand from the tax changes may not have been foreseen when the policy was first developed.


Above: Jon Lawes, managing director, Novuna Vehicle Solutions has concerns over VED changes for EVs.


He said: “The expensive car supplement [is] euphemistically known as a luxury car tax – it’s not really a luxury when you think that the majority of the electric vehicles fall into the category of cars that will be taxed with this new measure.


“I’m pretty sure when it was announced originally, several years back now, it wouldn’t have been envisaged that it would be penalising electric vehicles to this degree, and excessively so compared to the rest of the market.


“When you consider that a new car overall is around £42,000-£43,000 on average at the moment, and a new electric car is around £53,000 … that just shows that maybe there’s a rethink needed here.”


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