The UK car industry has called on the Government to introduce fairer taxation to encourage more motorists to switch to electric vehicles (EVs).
Research commissioned by the Society of Motor Manufacturers and Traders (SMMT) found that many drivers interested in buying an electric car were delaying their purchase because of concerns around affordability and charging costs.
The organisation believes targeted tax reforms could help accelerate EV adoption and support the UK’s journey towards achieving net zero emissions.
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Why is the SMMT calling for tax changes?
Although the UK remains one of Europe’s largest markets for electric vehicles, growth in private EV registrations has slowed.
Business fleets continue to drive electric vehicle sales, but private buyers now account for a much smaller share of new EV purchases than they did just a few years ago.
The SMMT argues that making electric vehicles more affordable would encourage more households to make the switch sooner.
The SMMT’s proposed tax reforms
The organisation has recommended several measures designed to boost electric vehicle demand.
Reduce VAT on new electric vehicles
One of the key proposals is to halve the rate of VAT charged on new electric cars.
Lowering the upfront purchase price could save buyers thousands of pounds and help narrow the price gap between petrol, diesel and electric vehicles.
Reform Vehicle Excise Duty (VED)
The SMMT also wants changes to Vehicle Excise Duty to ensure electric vehicles are treated as an essential part of the UK’s transition to cleaner transport rather than being taxed as premium vehicles.
Reduce VAT on public charging
Drivers who charge their vehicles at home currently benefit from a lower VAT rate than those relying on public charging points.
The SMMT has proposed reducing VAT on public charging from 20% to 5%, creating greater fairness for motorists who cannot install a home charger.
This would particularly benefit people living in flats, rented accommodation or homes without off-street parking.
Why does the industry believe these changes are necessary?
The SMMT argues that several barriers continue to discourage private buyers from choosing an electric vehicle, including:
- Higher upfront purchase prices.
- Concerns about public charging costs.
- Range anxiety.
- Limited access to home charging.
Reducing some of these financial barriers could encourage more drivers to make the switch earlier.
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What did the SMMT say?
SMMT Chief Executive Mike Hawes argued that government action would help provide motorists with greater confidence to invest in electric vehicles.
The organisation believes encouraging EV adoption would bring a number of long-term benefits, including:
- Cleaner air.
- Lower vehicle emissions.
- Quieter roads.
- Lower running costs for motorists.
- Progress towards the UK’s net zero targets.
Could reducing VAT increase EV sales?
According to the SMMT’s research, reducing VAT on new electric vehicles was viewed as one of the strongest financial incentives available.
Many motorists surveyed said a lower purchase price would encourage them to move to an electric vehicle sooner than planned.
The organisation also suggested that such incentives could represent good value for government compared with previous electric vehicle grant schemes.
If you’re wondering about charging costs, don’t worry as we’ve looked into these already for you and explore How Much Does It Cost to Charge an Electric Car.
Final thoughts
Electric vehicle adoption continues to grow across the UK, but affordability remains one of the biggest obstacles for many private buyers.
The SMMT believes targeted tax reforms — including lower VAT on new electric vehicles and public charging — could help remove some of those barriers and encourage more drivers to make the switch.
Whether future governments introduce similar measures remains to be seen, but affordability is likely to remain a key factor in accelerating EV uptake.
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