This will be achieved through an increase in Vehicle Excise Duty (VED) - also known as car tax, road tax or road fund licence - for EVs and certain hybrids, bringing them in line with existing rates for conventional internal combustion engine (ICE) models.
VED, sometimes referred to as "road tax" or “car tax”, has been used in the past to encourage the purchase of low-emission or zero-emission vehicles by offering lower rates for less polluting cars and higher rates for 'gas-guzzlers'. However, under the new plan, zero-emission cars will be placed in the lowest tax rate, with a VED of £10 for the first year and £165 per year thereafter. Additionally, the exemption for EVs from the "expensive car supplement" will be eliminated, meaning that any car with a list price of £40,000 or more will incur an additional £355 charge for five years beginning in the second year of ownership, after which the rate will return to the standard rate. This could result in an annual cost of around £520 for some EV owners.
The changes to VED for zero-emission cars will also be backdated to vehicles registered after April 1, 2017, meaning that individuals currently paying no VED will now be required to pay the standard rate of £165 per year. Low- and zero-emission cars registered between March 1, 2001 and March 30, 2017 and currently in Band A will be moved to Band B and will have to pay £20 per year, making these vehicles cheaper to operate than those registered after the 2017 cut-off. Zero-emission vans will also be subject to the £290 rate for ICE light goods vehicles, while zero-emission motorcycles and trikes will be moved to the lowest band, currently at £22. Cars classified as "alternative fuels," which currently receive a small discount on the standard rate, will also be moved to the £165 rate.
Company car drivers should be relieved to learn that Benefit In Kind (BIK) rates, for cars emitting less than 75g/km of CO2, will only increase by 1% per year starting in 2025-26, so the significant tax savings for driving an electric vehicle, like the Ford Mustang Mach-E or the Ford E-Transit, as well as plug-in hybrid vehicles, such as the Ford Kuga PHEV, will remain in place. The fixed benefit rates for vans and other commercial vehicles, as well as their fuel, will increase in line with inflation in April 2023, based on the Consumer Price Index (CPI).
So, if you’ve been considering moving into an all-electric or hybrid new Ford car, click the button below to see the range of electrified Ford vehicles we have to offer.