SMMT call for VAT to be halved on new electric vehicles

A year ago, only one in 10 drivers said they were going to wait until after 2030 before they bought their first EV but, 12 months on, that figure has soared to 50%.

This has emerged in new research commissioned by the Society of Motor Manufacturers and Traders (SMMT), leading the society to call for Government action to reverse this trend.

Ahead of this week’s budget the SMMT claim the solution lies in tax reform and have published a three-point plan of reforms they say would recharge the market.

Based on the results of the survey, the society say the most effective policy change would be to incentivise potential private buyers with tax cuts. As they point out, the vast majority of EVs sold in the UK are to businesses and fleets because they enjoy tax incentives to do so. Since 2022, only one in four new EVs are sold to private buyers – a worsening position from the one in three before that.

Having learned from the survey that a VAT cut would be the most effective tool to transition drivers to EVs sooner, they are asking that the VAT payable on new EVs be halved for three years.

It is observed that buyers of heat pumps and solar enjoy financial incentives to do so and it is time the motorist was considered in the same way.

The SMMT believe that such a move would add 270,000 extra EVs to the road over the next three years. this would in turn boost the market for used EVs which increased by 90% last year.

The second solution they posit is that the luxury car levy that applies to a lot of EVs be scrapped. Changes to vehicle excise duty in 2025 will mean that 70% of EVs will be subject to an ‘expensive car’ supplement.

The third solution is the oft-heard call for VAT on public charging being brought into line with that paid by owners who can charge at home. 

Mike Hawes, SMMT Chief Executive, said: ‘The Budget is a crucial opportunity to re-energise the EV market, with fair tax for a fair transition. The Chancellor must end the perverse fiscal system that discourages drivers from moving away from fossil fuels and send a clear signal that the time to go electric is now. Success will see our economy powered up by zero emission mobility, delivering cleaner air, quieter roads and cheaper running costs, ending the uncertainty we are seeing amongst motorists.’