Urgent calls for new law changes to slash VAT rates on electric cars and add 1.9m EVs to UK roads

Urgent calls for new law changes to slash VAT rates on electric cars and add 1.9m EVs to UK roads

Danny Kelly hits out at new ZEV mandate

Felix Reeves

By Felix Reeves

Published: 05/01/2024

- 12:48

The VAT cut could act as the biggest incentive for drivers to invest in EVs

The motoring industry is calling on the Government to slash rates of VAT on new electric cars to help drivers make the switch to cleaner vehicles.

The Society of Motor Manufacturers (SMMT) has urged the Government to make a major change in a bid to promote growth in the private sector.

It argues that electric vehicles are selling exceptionally well while the Treasury “reaps a VAT windfall due to these vehicles typically having higher purchase costs than their ICE counterparts”.

Experts have urged the Government to introduce changes to make it easier for the general public to invest in EVs.

Electric car charging

The SMMT believes a VAT cut would encourage 270,000 new car buyers to switch to EVs


While battery electric vehicles accounted for one in six new cars registered during 2023, most of these were purchased by businesses and fleets.

Companies and private groups are able to take advantage of significant tax benefits which the general public are not able to make use of.

Almost all new electric vehicles cost more than £30,000 and with the cost of living crisis still raging, many drivers may choose to buy a cheaper petrol or diesel car instead.

Because of this, the SMMT argues that “halving VAT would give consumers an estimated additional £7.7billion in BEV buying power to the end of 2026, while reducing the Treasury’s tax take by just 22 per cent per vehicle for each additional driver switching from an ICE to a BEV”.

The SMMT believes that this would encourage 270,000 new car buyers to switch to electric vehicles.

It would also push 1.9 million new EVs onto the road by the end of 2026, a massive leap forward in the Government’s net zero targets.

The Government has previously helped motorists deal with the expensive upfront cost of an electric vehicle with the Plug-in Car Grant.

This enabled drivers to save more than £1,000 on the cost of a new EV, with the earliest grant allowing people to save £5,000.

It was slowly downgraded until its final form where drivers could save £1,500 on vehicles with a recommended retail price of £32,000 or less.

Much to the dismay of drivers and the car industry, the grant was pulled in June 2022 after more than £300million was put towards the purchase of new EVs over 11 years.

According to the SMMT, this makes the UK the only European market with no purchasing incentives for electric cars.

Mike Hawes, chief executive of the SMMT, said: “Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles.

“It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for zero-emission vehicles.”

Drivers can still benefit from an EV grant if they are looking to purchase a motorcycle, moped, van, truck, taxi or wheelchair accessible vehicle.


Electric car charging

The Plug-in Car Grant was cut in 2022


Total grants range from £500 off the price of a motorcycle and as much as £25,000 as a maximum discount available for large trucks.

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