Politicians have claimed that an “urgent review” of car tax fees is required to encourage motorists away from petrol and diesel vehicles.
The House of Lords Environment and Climate Change Committee has called for a “radical rethink” over how motorists are charged to use Britain’s roads.
Electric car owners are currently exempt from paying most motoring taxes saving owners hundreds of pounds a year.
This will change within months with electric cars set to pay Vehicle Excise Duty (VED) for the first time from April 2025.
It comes as the Treasury expects to lose millions of pounds as take-up of the new machines finally begins to gain traction.
But, it’s a time of crossroads for the industry with concern that a lack of incentives to switch could also backfire with costs still one of the biggest barriers to widespread adoption.
The Committee’s latest ‘EV strategy: rapid recharge needed’ report said measures should still look to “incentivise low-emission” vehicles.
The study read: “The shift from petrol and diesel to EVs—currently exempt from fuel duty, congestion charging and vehicle excise duty—necessitates a radical rethink of road taxation.
“The tax system should be aligned with the Government’s policy objectives. Fiscal measures must incentivise low-emission choices and disincentivise polluting ones.
“As the UK moves away from petrol and diesel cars, people need an understanding of the total cost of motoring with EVs.
“We support the conclusions of the Transport Committee’s 2022 report that comprehensive reform of road taxation is needed, to start an honest conversation with the public and work towards a system that is seen as fair and enjoys public acceptance.”
The Treasury is expected to take in £24.3billion of fuel duty in 2023/24 but revenues will continue to drop as more EVs are sold.
It is expected fuel duty income will fall by a whopping £13billion between now and 2030.
HM Revenue and Customs (HMRC) said increasing VED fees for EV owners from 2025 will “equalise treatment of zero-emission and internal combustion vehicles”.
They added the objective was “to ensure all drivers begin to pay a fairer tax contribution”.
The report comes just hours after the Society of Motor Manufacturers and Traders (SMMT) raised concerns about a lack of financial incentives for owners to switch to DVs.
They warned it was becoming “increasingly clear” that private buyers need more support to make the transition.
Mike Hawes, SMMT Chief Executive, called on the Government to do more to help prospective buyers to get over the line.
He said: “Manufacturers have been asked to supply the vehicles, we now ask Government to help consumers buy the vehicles on which net zero depends.”
