Chancellor may axe tax exemption for electric cars

Electric cars owners could be required to pay road tax by 2025.

It comes after a fall in motoring tax revenues as battery-powered vehicles are exempt from vehicle excise duty.

Sources suggest the measure could be introduced by the chancellor Jeremy Hunt in this month’s autumn statement.

In 2021 it was advised that new sources of revenue would be needed after it was forecasted that the growing share of electric car sales could cut tax revenues by £2.1bn from £33bn by 2026, according to the Office for Budget and Responsibility.

On average, most petrol and diesel drivers pay £165 a year in road tax. An array of financial incentives was offered by ministers to encourage motorists to switch to battery powered cars, including the tax breaks and purchase discounts. In the last year alone, around 15% of new vehicles sold in the UK were electric with more than one million battery-powered cars on the roads. It is thought continuing the VED exemption could cost the exchequer around £1bn a year by 2025.