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Electric Vehicles: Tax Allowances

Question for Treasury

UIN 187354, tabled on 26 April 2021

To ask the Chancellor of the Exchequer, what assessment his Department has made of the affordability in terms of public finances of introducing a favourable tax regime for the purchase of electric vehicles.

Answered on

28 April 2021

The Government currently uses the tax system to encourage the uptake of vehicles with low carbon dioxide emissions to help meet our legally binding climate change targets. This is why zero emission cars and electric vans are liable to pay no Vehicle Excise Duty (VED), and why users of zero and ultra-low emission cars have favourable company car tax (CCT) rates in comparison to conventionally fuelled vehicles.

The Net Zero Review interim report published by HM Treasury in December last year highlighted that structural changes in the economy related to net zero will have fiscal implications. Much of the revenue from fossil fuel-based taxes is likely to be eroded during the transition to a net zero economy. However, there is currently a high level of uncertainty regarding the rate at which receipts decline.

As the UK moves forward with the transition away from petrol and diesel cars and vans, the Government will need to ensure that revenue from motoring taxes keeps pace with this change, so that the Government can continue to fund the first-class public services and infrastructure that people and families across the UK expect. Any changes to the tax system will be considered by the Chancellor and any further steps will be announced in due course.

Answered by

Treasury