Up until recently, electric cars were exempt from road tax and fuel duty. The incentive helped drive uptake of the vehicles, with 456,000 fully electric battery vehicles estimated to be on UK roads.
On average, electric vehicle running costs are currently estimated to be £528 cheaper than for petrol cars.
Last month, chancellor Jeremy Hunt punctured the first hole in the cars' tax-exempt bubble, announcing that electric cars, vans and motorbikes will pay vehicle excise duty (VED) from April 2025.
Zero-emission cars registered from April 2017 will pay the lowest rate of £10 in the first year, then move to the standard annual rate of £165.
Hunt also removed the exemption for electric vehicles from the £355 expensive car supplement, which applies to cars worth £40,000 or more. This will apply to new cars registered after April 2025.
The move is expected to raise £515m in 2025-26, increasing to £1.6bn in 2027-28. Yet it is unlikely to be the final word in taxing electric cars, with state coffers also facing a major hit due to the loss of fuel duty as petrol and diesel cars are phased out.
Fuel duty raised about £26bn per year but this is predicted to fall to below £5bn by the 2040s.
Some form of road pricing – where motorists pay a charge for the miles they drive – has been on the agenda for years. It is now gaining extra attention as a replacement to fuel duty given the looming ban on new petrol and diesel cars from 2030.
"I think there is a general consensus that, given that revenue from fuel tax is going to decline, unless we're going to have even less money for public services, something else has to go in its place," says Ben Bradshaw, Labour MP for Exeter and member of the Commons Transport Select Committee, which in February called on the Government to set out plans to replace lost fuel duty and submit them to an independent review. Ten months later, the Government has yet to respond.
