Electric Vehicles: Taxation

Treasury written question – answered on 22nd September 2021.

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Photo of Paula Barker Paula Barker Labour, Liverpool, Wavertree

To ask the Chancellor of the Exchequer, whether his Department has made an assessment of the potential merits of removing plug-in hybrid vehicles from the additional vehicle tax levied on cars with a list price over £40,000 to help meet the UK's target on carbon neutrality in 2050.

Photo of Helen Whately Helen Whately The Exchequer Secretary

Hybrid cars and vans, both non-plug in and plug in, have a role to play in reducing emissions from road transport during the transition to all new cars and vans being fully zero emission at the tailpipe. This is why hybrid vehicles receive a £10 annual discount on VED, although the greatest incentives are for zero-emission vehicles, which pay no VED.

Petrol, diesel and hybrid cars with a list price exceeding £40,000 also pay an additional supplement for five years as well as paying the standard rate, which means those who can afford the most expensive cars pay more than the standard rate imposed on other drivers. As over 80% of all new cars have a list price below £40,000, this was considered a suitable threshold for distinguishing the luxury end of the market. At Budget 2020, the Government announced that, from 1 April 2020, zero-emission cars registered prior to 1 April 2025 are exempt from this supplement.

As with all taxes, the Government keeps VED under review and any changes are considered by the Chancellor.

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