[New] Hunt puts the brakes on EV sales by removing VED exemption from 2025

Mark Bursa

Chancellor Jeremy Hunt’s decision to remove the Vehicle Excise Duty exemption from electric vehicles has been badly received by the industry, with the AA accusing him of “dimming the incentive” to switch to electric cars.

Hunt told the Commons in his autumn statement: “Because the Office of Budget Responsibility forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then electric vehicles will no longer be exempt from vehicle excise duty.”

Currently EVs pay no VED, but the Chancellor announced that the introduction of excise duty for electric cars will take effect from 2025. The move follows Treasury warnings that “new sources of revenue” would be needed to replace fuel duty as the country switches to EVs.

Fuel duty and VED raise about £35 billion a year for the exchequer, but the Office for Budget

Responsibility has forecast that the growing share of electric car sales would cut motoring tax revenues by £2.1bn by 2026-27.

Drivers of petrol and diesel cars could also see a rise in running costs increasing from next year, with a planned rise in fuel duty in March 2023 potentially adding 12p a litre to current fuel costs. The one-year 5p cut from Rishi Sunak’s budget in March is due to end next March, though Hunt may soften the blow by announcing a further fuel duty freeze in the Spring as successive