Chancellor Jeremy Hunt could outline plans to target electric cars in the Autumn Statement on November 17, with car tax changes. According to sources familiar with the situation, the Chancellor is considering “dipping a toe in the water” by applying car tax to EVs.
Last year, the Treasury warned that new sources of revenue would be needed as more electric vehicles hit UK roads.
With the 2030 petrol and diesel car sales ban just around the corner, revenue raised from fuel duty and car tax will be significantly reduced.
There has been pressure on the Government to address the £35billion funding “black hole” that will be left with the reduction in petrol and diesel cars.
Currently, electric cars do not pay fuel duty or vehicle excise duty as they do not use fuel, nor do they produce tailpipe emissions.
Electric vehicle owners could face car tax charges within three years.
Jeremy Hunt may announce the change in the Autumn Statement.
A Whitehall source claimed it was now inevitable that electric vehicles would be subject to road tax “at some point”, The Telegraph reported.
The source added that the Treasury was considering “when it would be done”.
As the 2030 deadline approaches, the £35billion shortfall will have a huge impact on Government finances.
It is estimated that £7billion will come from VED, while the remaining £28billion per year would come from a loss in fuel duty.
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Around one in six new cars bought in the UK this year are fully electric models, with experts predicting those numbers to climb in the future.
It was reported that the Treasury was facing a difficult decision as to how to introduce car tax for electric vehicles.
This includes when to introduce it and how to roll out such a scheme without putting people off from investing in electric.
In February, a Government report suggested that motorists should be taxed based on the number of miles they drive.
The Treasury said tax revenues would keep pace with changes prompted by the take-up of electric cars.
The Government claimed “radical reform” was needed otherwise there would be no revenue from motoring taxation once net zero is reached in 2050, and potentially even before in 2040.
The report stated: “The Government must make it clear to motorists who purchase electric vehicles that they will be required to pay for road usage, as is currently the case for petrol and diesel vehicles.
“It must ensure that any alternative road charging mechanism incentivises motorists to purchase vehicles with cleaner emissions while contributing tax revenues to support the maintenance of the road network.”
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Huw Merriman MP, the former chair of the Transport Committee, said the Government needed to act to remedy the loss of two major sources of taxation, VED and fuel duty.
He said the £35billion black hole is four percent of the entire tax-take, adding that: “Only £7billion of this goes back to the roads.
“Schools and hospitals could be [hit] if motorists don’t continue to pay.
“By using price as a lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives.”
Keyword: Electric vehicle owners could face car tax charges within three years