The UK car industry has suggested it is in discussions with Sir Keir Starmer’s Labour Government over altering a major car tax rule. The Society of Motor Manufacturers and Traders (SMMT) said they were “talking” to officials about a potential amendment to the Expensive Car Supplement (ECS) fees.
This is an extra £425 per year bill slapped onto brand-new vehicles with a list price of more than £40,000. The additional charge is applied for five years between the second and sixth years a vehicle is on the road, even if the car has been bought secondhand. The charge affects, among others, electric vehicles the most.
Mike Hawes, chairman of the SMMT said: “We’re talking to Government about whether they will amend that because that was introduced in 2017.
“Set at a rate of £40,000 vehicles and above, it hasn’t moved since 2017.
“Obviously inflation means an increasing number of numbers of cars are subject to that sort of fiscal drag and drawn into that, and the overwhelming majority of EVs are subject to an expensive car supplement, which is not the message you’re trying to give consumers.”
ECS fees were traditionally applied to expensive petrol and diesel vehicles such as supercars.
However, the massive upfront cost of electric and low-emission models means even family cars are now being hit by the charges.
According to a recent study, around seven in 10 new electric cars in the UK market are likely to exceed the £40,000 threshold and be liable to pay ECS charges.
The £425 bill is applied on top of the standard £195 Vehicle Excise Duty (VED) fee, meaning total bills will stand at £620 every year.
It would leave owners paying a total of £3,100 in total car tax fees over a five year period just to stay on the roads.
According to the SMMT, Britons are now enjoying the best ever range of zero-emission vehicles with two in five now battery electric.
Electrified models now make up 45% of UK new car sales with EVs available in every segment.
However, the SMMT stressed that more incentives and better infrastructure were still needed across the country.
“There’s never been a better time to go electric – with more choice, better vehicle range and improving infrastructure offering a compelling driving proposition. But the market still isn’t moving fast enough so bold support for consumer EV uptake – notably investment in incentives and infrastructure – is needed to accelerate decarbonisation efforts and make switching open to all drivers.”