NGC Budget Report: Boost for UK electric vehicle market

Next Green Car's summary of the Chancellor's Budget 2020 as it affects vehicle tax, fuel duty, BIK rates and other motoring taxes and incentives.

Chancellor Rishi Sunak made the following motoring-related announcements in the Budget 2020 (extracts reproduced in italics):

Plug-in Car Grant (PiCG)EXTENDED – The PiCG has been extended until 2022/23, with an additional £403 million investment. Future grant levels have not yet been revealed, but will continue at £3,500 for Category 1 vehicles (essentially pure-EVs only) until further notice.

Other plug-in vehicle grantsEXTENDED – Plug-in Van, Plug-in Taxi, and Plug-in Motorcycle Grants have all been extended, also to 2022/23. The Chancellor has continued these schemes with a package of investment worth £129.5 million.

EV charging InfrastructureINVESTMENT – The Chancellor included investment in rapid EV charging infrastructure worth £500 million over five years within the Budget. A Rapid Charging Fund will also be established through OLEV to assist businesses with the cost of connecting charge points to the grid.

Access to high quality, convenient charging infrastructure is critical for drivers to make the switch to electric vehicles confidently. The government is therefore providing £500 million over the next five years to support the roll-out of a fast-charging network for electric vehicles, ensuring that drivers will never be further than 30 miles from a rapid charging station.
This will include a Rapid Charging Fund to help businesses with the cost of connecting fast charge points to the electricity grid. To target spending from this fund effectively, the Office for Low Emission Vehicles will complete a comprehensive electric vehicle charging infrastructure review.

Vehicle Excise Duty (VED)NO CHANGE – VED rules largely remain the same (see below for exception), with costs based on emissions and price. Rates will increase in line with RPI from 1st April 2020. First Year Rates continue to be purely emissions based, with these included in a model's OTR price. Thereafter cars get charged a Standard Rate or Premium Rate - for those models costing more than £40,000 - with a £10 Alternative Fuel Discount available for eligible vehicles.

The government will uprate VED rates for cars, vans and motorcycles in line with RPI from 1 April 2020.

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Premium Rate VEDREMOVED FOR ELECTRIC CARS – Although VED rules have remained largely unchanged, the Chancellor has removed the Premium Rate for all electric cars, even those costing more than £40,000. Those pure-EVs registered until 31st March 2025 will not pay the additional Premium Rate for years 2-6 on the road, changing the previous regulations where all cars costing more than the threshold - electric or not - were charged the additional rate.

From 1 April 2020, the government will exempt all ZEVs (zero-emission vehicles) registered until 31 March 2025 from the VED 'expensive car' supplement. The measure will incentivise the uptake of ZEVs to support the phasing out of petrol and diesel vehicles

Fuel DutyFROZEN – Rishi Sunak revealed a freeze on fuel duty. This means that fuel duty will have been frozen for a tenth year in a row, the longest fuel duty freeze for more than 40 years. Fuel duty therefore remains at 57.95 pence per litre until further notice.

Company Car TaxNO CHANGE – Changes announced in July 2019 remain. Focus and incentives for pure-electric models and the most efficient PHEVs through zero or low BIK rates remain in place as expected.

The government will reduce most CCT rates by 2% in 2020-21 for cars first registered from 6 April 2020. Rates will return to planned levels over the following two years, increasing by 1% in 2021-22 and 1% in 2022-23. Rates will then be frozen until 2024-25.

Find out more about Company Car Tax on NGC's microsite

Van Benefit ChargeREMOVED FOR ZERO-EMISSION VANS – The government will apply a nil rate to zero-emission vans within the van benefit charge. The measure will save businesses an estimated £433 per van in tax in 2021/22. For all other models, the van benefit charge will increase in line with CPI from 6th April 2020.

Fuel Benefit ChargeNO CHANGE – Fuel benefit charge will increase inline with CPI from 6th April 2020.

First Year Allowances100% WDA RETAINED ONLY FOR PURE-EVS – The 100% Write Down Allowance (WDA) will, from April 2021, be extended to zero-emission vehicles only.

To support the uptake of zero emission vehicles and ultra-low emission vehicles (ULEVs), from April 2021, the government will extend first year allowances to ZEVs only and apply the main rate writing down allowance (WDA) of 18% to cars with emissions up to 50g/km. The special rate WDA of 6% will apply to higher polluting cars with emissions above 50g/km.

Find out more about Electric Vehicles (EVs)

Chris Lilly

Author:Chris Lilly
Date Updated:11th Mar 2020

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