Why electric car drivers are about to be taxed more

Added: 2026-05-07

[00:00:00]Recent data suggests that inquiries to buy electric cars have risen 23% month-on-month while used EV inquiries are up 30% since the war in Iran began.

[00:00:10]Meanwhile, the Labour government, since coming to power, has expanded the list of EVs eligible for government grants, a scheme backed by 650 million pounds of taxpayer money. So, you might then be surprised to hear that electric car drivers are about to face a new tax in 2028. It's a pay-per-mile scheme that would see people taxed on the distance they drive in their EVs as the Treasury fears a drop-off in tax revenue from petrol and diesel sales. Well, one coalition of organizations has written to the secretary to the Treasury in protest of this policy saying it could end up costing the UK economy 4.8 billion pounds. Matt Adams is head of electrical transport systems at the British Electrical Allied Manufacturers Association. I've got that right.

[00:00:57]Uh BEAMA for short, who sent that letter and joins us now. Um first of all, why don't you explain to listeners very briefly what BEAMA is and how you arrived at that figure? Yeah, so uh BEAMA are trade association that represent uh manufacturers of mostly energy smart appliances. And so, I work with charge point manufacturers who manufacture in the UK and in Europe uh predominantly. And uh we were very concerned when we saw the EV tax policy come in uh because it does sort of create uncertainty around EV sales going forward.

[00:01:32]So, what we what we had a look at was where this policy's been implemented abroad in the past. So, we've got New Zealand and Iceland.

[00:01:41]In New Zealand, they saw a 50% decline in EV sales and in Iceland a 75% decline.

[00:01:47]So, we then said, "Well, if we take yeah, sales yeah, last year's sales figures, so about 2 million cars on the road, new vehicles sold on the road. So, we say, "Okay, fine, but 52% decline in EV sales in New Zealand, we modeled that against those potential figures and said the VAT revenue uh of those new car sales would be worth about uh yeah, about 4.8 billion uh as a drop-off, which it was very concerning.

[00:02:16]I suppose where would you make up that shortfall then because there is going to be this massive cliff edge at some point where fuel duty sort of stops being relevant, say like in the mid 2030s. I suppose what's the alternative? So, what we're saying as a coalition of voices, so ourselves, Charge UK, the REA, and EVA England, is that we would like to see it delayed till 2030. So, in 2030, uh we will see the zero emissions vehicle mandate policy kick in where we will see an end of sale of petrol and diesel vehicles and only have EVs and hybrids being sold. And at that point, the impact of any policy that un- undermines consumer sentiment will be far reduced. So, all we're saying is delay till 2030. Do you not think that policy itself won't end up getting pushed back cuz the infrastructure isn't really there at the moment? I mean, I'm I'm always very dubious especially cuz there have been slippages in terms of these time frames before. Rishi Sunak pushed it back as well, didn't he?

[00:03:09]Well, I I I think, you know, we're actually on a pretty good track at the moment. We're seeing a a charge point installed publicly about once every 20 minutes. Uh we've got about uh well, depending on whose figures you look at, >> There's one on my flat, actually.

[00:03:21]>> [laughter] >> about 120,000 public charge points in the UK and about near about 1.5 million domestic. So, I think we're doing pretty well and we we should get there. Now, one big uh challenge that EV uh manufacturers face is the cost. They are not cheap. Even the uh models on the slightly cheaper end of the scale are expensive compared with, say, a second-hand fossil fuel car. Is I could easily construct an argument or devil's advocate argument here and say the people buying EVs have the money to pay this tax. So, what's wrong with that? Well, uh it it's probably twofold.

[00:03:58]So, firstly, uh the way the ZEV mandate works is the car manufacturers will be fined if they don't uh sell the electric vehicles they're mandated to. So, the government are creating a sort of hostile economic policy that will result in, you know, maybe undermining EV sales to a point where car manufacturers would be fined as a result of the tax policy coming in.

[00:04:19]>> What is the worst-case scenario of those unintended consequences?

[00:04:23]Well, I I think from our perspective, it's the cost to the UK economy. So, for for EVED, the entire revenue generated in the first three or four years will be about 4.3 billion. But the potential is in 2028 alone, it could cost the UK economy up to about 4.8 billion.

[00:04:40]But even if we use, say, more conservative figures like the OBR's who say there'll be about 430,000 less electric vehicles sold over those three or four years period, that's still worth about 4 billion in VAT revenue.

[00:04:52]Well, [snorts] as usual here at City AM, we hope the government come to their senses. And and very often we ask questions like, >> [laughter] >> "What's the worst-case scenario?" That's the closest. That's quite a good one. It is it's a really good one. I learned that one from you, Matt. Uh other Matt, Matt Adams, thank you very much for joining us. Thank you for coming in and uh best of luck with uh convincing the government to see sense.

[00:05:12]Thank you.