New Tax Brackets Could Hurt Electric Car Sales In UK

8 months ago by Mark Kane 10

Plug-in electric cars in UK (Go Ultra Low)

Mitsubishi Outlander PHEV

UK is one of the largest plug-in car markets in Europe with 36,917 new passenger plug-in registrations in 2016. That number include 24,714  PHEVs.

According to Autoexpress, new car tax brackets that will be introduced in April will limit exemptions:

“The government’s new car tax brackets will move 66% of the available alternatively fuelled vehicles from road tax exemption to being subject to a £130 flat rate annual fee.”

Autocar

The good news is that zero-emission models (all-electric or hydrogen fuel cells) will still be exempted, as long as the price is below £40,000.

“Unlike the current system, where low-emission petrol and diesel cars are tax exempt, the new VED system will only be free for vehicles with no tailpipe emissions – that means electric and hydrogen cars only. That’s not all though, as there’s a new five-year supplement to pay for cars costing more than £40,000, which will be priced at £310.”

“Cars registered after April 1st 2017 will pay a one-off tax charge for the first year, with rates decided by a heavily revised version of the current CO2-based tax band system.

The adjustments mean most buyers will see their first year tax charge virtually doubled, while only zero-emissions vehicles will get away with paying nothing at all.

From the second year onwards, the CO2 scale becomes irrelevant, as two flat rates will then be applied – a £0 (zero) VED rate for zero-emissions vehicles only, and a flat annual rate of £140 for all other cars.

While cars costing over £40,000 will also be liable for the £140 VED rate from year two, they will also be forced to pay an additional annual ‘supplement’ of £310 for the first five years.

That means expensive £40k+ zero-emissions cars will no longer get away with a free ride, as they’ll have to pay the £310 supplement. Everything else in the £40k+ bracket will pay £450 a year (£310 supplement + £140 flat rate) until that five-year period is over and they revert to the £140 flat rate.”

Autoexpress

Summary:

BEVs: £0

Plug-in hybrids – Emissions 1-50 (g/km of CO2): £130 after first year

Plug-in hybrids – Emissions 51-75 (g/km of CO2): £15 in the first year and £130 thereafter

Plug-in hybrids – Emissions 76-90 (g/km of CO2): £90 in the first year and £130 thereafter

* Cars above £40,000 pay £310 annual supplement for five years

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10 responses to "New Tax Brackets Could Hurt Electric Car Sales In UK"

  1. Billy Bobs says:

    Brilliant news for pure EVs. Skip hybrids – they’re a stop gap and are preventing BEVs from really taking off.

    1. vadik says:

      I second it, BEVs are the way to go and only them are worth subsidizing

  2. floydboy says:

    BRACKXIT!

  3. Mike I. says:

    The question is what the fees are traditional ICE vehicles. The comparative benefit between ICE and Plug-In Hybrid is relevant too, not just the absolute figures.

  4. Just_Chris says:

    I don’t think the new system is all that bad and I also don’t think it is going to change peoples buying habits dramatically either way. The biggest effect will probably be on sales of highly emitting vehicles which will now have to pay up to 2000 pounds for the first car registration.

    I would have preferred to see a slightly lower rate for cars sub 75 g/CO2/km and for the 2000 pound band to start at 150 g/CO2/km. I also think that cars that emit more than 150 g/CO2/km should pay a higher annual rate perhaps 500-1000 pounds. I think that is important because it will encourage the scrapping of those cars earlier and also because it would reduce their resale value.

    Having said all of that, the most important tax is the first year road tax as that has a disproportionately large affect on peoples buying habits. The tax on fuel is still the same and is a much bigger cost than the road tax on a high emission car.

    full details of bands can be found here:

    http://www.autoexpress.co.uk/car-news/consumer-news/88369/car-tax-bands-what-you-need-to-know

  5. Miggy says:

    If GM did sell the Bolt in RHD this would have been a big win for GM, Go Tesla.

  6. przemo_li says:

    They had tax exceptions on diesels??????????

    1. Gazz says:

      Yes. The Labour government under Tony Blair with Gordon Brown at number 11. Changed road tax from being engine size to co2 categories. The aim was to promote diesel as a green fuel.

  7. DTM says:

    Same in The Netherlands, future exemptions only apply to pure electric cars. Hybrids will be no longer supported.

    Allthough I think it would be fair to release exemptions based on lifetime gas usage (measured by all hybrids), it’s probably to complicated to enforce.

    It’s best to move to BEV asap

  8. unlucky says:

    Aww. Now BMW’s investment in minimum range
    PHEVs is at risk? Time to step up BMW. And all German makes.