Jeremy Hunt said, “The OBR (Office for Budget Responsibility) predicts that half of all new cars will be electric by 2025, and to make our car tax system fairer, I have decided that from then on, electric cars will no longer be tax-free.”

Vehicle Excise Duty (VED) is a tax on vehicles driven on UK roads. Currently, electric cars are tax-free. According to the UK’s newly announced plans, from April 2025, electric cars will also start to pay excise duty, paying a minimum rate of £10 in the first year, rising gradually to the current standard rate of £165 thereafter. The standard rate will then also apply to electric cars first registered after April 2017.

In addition, the exemption for electric cars from the cost of expensive car extras has been removed. This means that any owner who buys an electric car costing more than £40,000 will face a £165 excise duty and a £355 expensive car extra service charge (between the second and sixth year of new car registration).

It is planned that the UK will ban the sale of new petrol and diesel cars from 2030. The change in the UK’s policy on electric cars means that in just a few years, electric car owners will go from paying no car tax to paying the same car tax as petrol or diesel car owners. Some agencies have warned that the move will reduce the incentive for people to switch to electric cars.

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