Fleets ‘in the dark’ over VED hike on electric vehicles from April

The Association of Fleet Professionals (AFP) is concerned that many fleets are unaware of changes to vehicle excise duty (VED) for electric vehicles (EVs) coming in from April.

The VED hike, announced in the Autumn Budget, applies to both pure EVs and plug-in hybrids (PHEVs).

The AFP warns that some will see their liability on widely-adopted EVs rise per vehicle from zero to £2,490 over a five-year period.

First year VED rates are being increased from zero to £10 for battery electric vehicles (BEVs) and from zero to £110 for PHEVs emitting between 1-50g/km of CO2. 

Second year rates have risen more dramatically for BEVs – from zero to £195.

Furthermore, EVs costing more than £40,000 that are registered from April, will now become liable for the expensive car allowance, also dubbed the luxury car tax. 

It will increase from £410 to £425 from April and applies annually for five years starting from the first standard VED payment that is made when the car is a year old. 

James Pestell, AFP director, said: “The feedback we are receiving is that many fleets simply haven’t appreciated and accounted for these increases, which are substantial when applied across entire fleets operating dozens, hundreds or thousands of EVs and PHEVs.

“From April onwards, they’ll be receiving bills from the DVLA or shortfall invoices from their leasing supplier, and won’t have factored them into their running costs. That’s why we are flagging up this issue now.”

Taken together, the VED increases represented a major jump in costs for EVs. 

Pestell continued: “Electric cars costing over £40,000 bought after the start of April – including some of the most common models on fleets – that would have attracted no tax in 2024-25 will be liable for £2,490 during the first five years of their life. That’s a big increase.”

The AFP will be holding a Tax Year End webinar on Tuesday, March 4, at 10am, featuring tax specialist Harvey Perkins of HRUX and mileage reimbursement expert Barry Monks of TMC. 

It will cover VED issues and more including the P11D process, PHEV benefit in kind changes, double cab pick-ups, car allowance payments, what is a business mile, and CO2 tax changes from 2028.

The warning from the AFP comes in the wake of analysis from Alphabet, which revealed just one-in-five zero-emission cars (19%) currently costs less than £40,000. 

Alphabet data reveals that the average P11D value of quotable petrol, diesel, hybrid and EV models is £51,855 – just over 25% more than the current £40,000 threshold. 

However, if you look at the 961 quotable EV models, the average list price is £60,273, and for 81% of quotable EVs that are listed over £40,000, the average P11D equates to £66,041, leaving just 19% below that threshold.

As a result, Alphabet is calling on the Government to increase the threshold to £60,000 for EVs to better reflect the market.