The government is being urged to halve the level of VAT on new electric vehicles to promote growth in the private sector.
The Society of Motor Manufacturers (SMMT) – which is making the call – states that according to its data, electric vehicle update has risen ‘almost 20-fold’, with ‘the Treasury reaping a VAT windfall due to these vehicles typically having higher purchase costs than their ICE counterparts’.
However, though battery electric vehicles accounted for one in six new cars registered during 2023, the vast majority of these were taken by business and fleet buyers who can take advantage of significant tax benefits. For private owners, the heightened cost of purchasing a new electric vehicle remains a key stumbling block, alongside the price of installing a charger at home. It’s why only one in 11 private buyers chose an EV last year.
With the end of the plug-in car grant in June 2022 – which brought a discount on the price of a new electric vehicle for private owners – the UK becomes the only European market with no EV purchasing incentives.
It’s why the SMMT says that ‘halving VAT would give consumers an estimated additional £7.7 billion in BEV [battery electric vehicles] buying power to the end of 2026 while reducing the Treasury’s tax take by just 22% per vehicle for each additional driver switching from an ICE to a BEV.’
The SMMT says that the move would ‘encourage’ 270,000 new car buyers to make the switch to an electric vehicle while pushing 1.9 million new electric vehicles onto the road by the end of 2026.
Mike Hawes, SMMT chief executive, 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.”