ELECTRIC car owners will have to pay vehicle excise duty road tax from 2025 onwards.
Up until now, electric vehicles were exempt from both the annual, second-year Â£165 VED standard rate payment, as well as the ‘luxury supplement' payment of Â£335-per-year which new cars with a list price in excess of Â£40,000 command.
Now Chancellor Jeremy Hunt has used is Autumn Statement to say that owners of emission-free cars and vans will now have to pay VED, beginning in 2025.
The decision brought mixed reactions from the auto industry with Society of Motor Manufacturers and Traders chief executive Mike Hawes saying it could threaten used car markets for zero emission models.
He said: "We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced today mean electric car and van buyers - and current owners - will face a significant uplift in VED.
"The sting in the tail is the VED supplement which will unduly penalise these new, more expensive vehicle technologies. The introduction of taxes should support road transport decarbonisation, and the delivery of net zero, rather than threaten both the new and second-hand EV markets.
"With a ZEV mandate on the way for car and van manufacturers, we need a framework that encourages consumers and businesses to buy electric vehicles. We look forward to working with government on how to transition the market and ensure the tax framework on road users supports this objective."
David Lewis, head of electric vehicles & energy at Select Car Leasing, one of the UK's largest vehicle leasing specialists, described the move as ‘disappointing - but inevitable'.
He said: "It was always inevitable that EV owners would one day have to pay vehicle excise duty or a similar tax so this doesn't come as a great surprise."
He added: "In my view EV road tax has been brought in at least two, three years ahead of time, as a reaction to a challenging financial outlook.
"And while that's disappointing on the face of it - and an embarrassing announcement to make during COP 27 - I don't ultimately see this as being a ‘deal-breaker' for those looking to get behind the wheel of an EV."
The first year VED for zero emission cars from 2025 will be set at the lowest rate - £10 - before moving to the standard rate of £165 a year.
The chancellor also announced that for company car drivers Benefit in Kind rates for EVs would be kept low with a one per cent increase from April 2025, for three years.
Mr Lewis added it was crucial cash-strapped UK motorists understand that they can still save money when driving an EV compared with a traditionally-fuelled car - even if they will ultimately have to pay road tax from 2025.
"We should be incentivising EV ownership as much as we can, not giving people a reason to turn away from it," he said.
"The Benefit in Kind tax payments for EV company cars are also temptingly low - just two per cent - compared with a traditionally fuelled car."