238 - The VED Episode

Gary C:

Hi, I'm Gary, and this is EV Musings, a podcast about renewables, electric vehicles, and things that are interesting to electric vehicle owners. And on the show today, we'll be looking at vehicle excise duty for electric vehicles. Our main topic of discussion today is EVVED.

o here goes. Many years ago,: 1920

own as the road tax. Then in: 1937

Officially speaking, road tax does not exist any longer. Its proper name is vehicle excise duty or VED. Now one way you used to be able to tell if a car had paid its excise duty was that it displayed a tax disc in the window.

ax disc expired. And then in: 2015

Responsibility for VED used to lie with local councils, but it now lies with the DVLA, the Driver and Vehicle Licensing Authority, who are the people who also manage your driver's licenses. So now you know the story of VED, why is it worth an episode? Well, it's to do with what's happening with vehicle excise duty and electric cars.

Now prior to: 2001

Now for all the discussions that I'm having here, this is related specifically to cars and not vans or other vehicles. So just bear that in mind. During the Tony Blair's Labour government years, there were calls to scrap the tax as being unfair and perhaps add the cost onto fuel duty at the petrol pump.

The government realised, however, that this would be a vote killer and it developed an alternative way to implement the tax. They used the vehicle's tailpipe emissions as a way of banding vehicles into groups and applied a variable tax rate on the groups. If your car emitted up to 100g of carbon dioxide per kilometre, you would pay zero vehicle excise duty.

to be paid every year. From: 2001

But in: 2017

Hybrids now fell into the higher band of 1 to 50g per kilometre and were charged £10. Top polluting vehicles with emissions over 255g per kilometre were now charged £2,365. But where this became interesting was that this amount was only charged for the first year of the car's registration.

For the second year onwards, the rate was fixed at £165. So you could buy your low emissions hybrid, pay £10 for the first year but then have to pay £165 for every year after that. Similarly, you could buy your top of the range diesel Range Rover and pay £2,365 for the first year but only £165 for the second year.

But it didn't stop there. The government also introduced an expensive car supplement. This applied to cars with a list price of £40,000 or above and added an additional £355 for all cars from years 2 to 6.

In the: 2020

billion in: 2024

upplement. But then came the: 2024

But when the dust had settled there were a number of newspapers that raised the flag for UK motorists screaming about the unfairness of some cars having to pay a VED tax hike of £2,475. Now on the face of it that's ridiculous right? Well the story, as you may have guessed, isn't quite as black and white as some people would imagine.

It's fine to put up a headline screaming £2,475 tax hike for cars but the reality is slightly different. Electric vehicles with zero tailpipe emissions will now be subject to a VED of £10 for their first year of registration. Anything with one or more grams per kilometre of emissions will be subject to at least £110 for the first year.

from: 2026

So yes a polluting car will pay more in the first year and an expensive car will pay an additional amount on the first five years of £410. The expensive car supplement will now also apply to electric vehicles. But let's put this into perspective and look at some numbers.

Your base version Range Rover SE has a list price of £104,025. The cost of the first year's tax on the diesel hybrid version is £3,300 with an additional £410 for it being over 40k. Every year after that it will be £195 plus the £410 expensive vehicle supplement.

To put that in context if you were to spec the metallic racing green paint option for your Range Rover that would add £7,990 to your purchase price. If you went for the satin finish instead that's £9,990 or more than the first five years of vehicle excise duty on your expensive polluting car. Let's look at something a little cheaper shall we.

The BMW X320 has emissions of 163 grams per kilometre. This puts it in the £1,360 band for the first year and £195 per year after that, with a list price of £48,370 will also attract the £410 expensive vehicle supplement for the first five years. So what about something a little throatier, for all those petrolheads who like to hear the sound of the engine.

The Ferrari Roma, or as I like to call it the entry level Ferrari, has a starting price of almost £173,000. The emissions on this put it right at the top of the vehicle excise duty range, £5,350 plus the £410 expensive vehicle supplement. But again, for the second year onwards it will just be £605 which is including the expensive vehicle supplement.

st of April: 2025

A Renault Megane, list price of £37,995 for the top of the range Iconic model, with no additional extras, first year VED £10, second year onwards £195. A Volkswagen ID. 3 Pro S Essential, £39,190 on the road, first year VED £10, second year onwards £195.

But if you go for the next spec up, the Pro S Match, the price is £40,050 and the VED is still £10 but it has the £410 expensive vehicle supplement. Subsequent tax for the next 5 years will be the £605 including the expensive vehicle supplement. A Volkswagen ID.

7 Tourer Pro Match model, basic version, £52,440 on the road, first year tax £10, plus £410 expensive vehicle supplement. Subsequent tax for the next 5 years, £605 including the expensive vehicle supplement. A BYD Dolphin Design, top of the range, £31,695 on the road, first year VED £10, second year onwards £195, no expensive car supplement.

The BYD Seal, on the other hand, is £45,685 on the road, VED in the first year is £10, plus £410 expensive vehicle supplement. Subsequent tax for the next 5 years, £605 including the expensive vehicle supplement. And so on and so forth.

But long story short, if you buy an EV under £40,000 on the road, you'll be paying, give or take, £985 in vehicle excise duty for 5 years. If you buy an EV over £40,000 you'll be paying £2,860 in VED over 5 years. That's a difference of £1,875 because you chose to buy a new car with a retail price over £40,000.

st: 2025

So how do things like this affect your lease? Well, if you're buying a new EV there will be a cost associated with the VED, £10 in the first year and £195 after that for vehicles under £40k. Lease companies will factor this into the price of a new lease.

The jury's out at the moment on whether this will be applied retrospectively to leases that were taken out recently for higher value EVs. But depending on the car you've got, the lease per month will now be higher for new electric vehicles. And I think that's chapter and verse on VED for electric vehicles and others.

Now, on a personal level, I think the rate is appropriate for the first year, but I don't see why, if the rate is based on emissions, I should be paying the same vehicle excise duty for a zero tailpipe emissions EV in year 2 as a Range Rover that's getting 8mpg and kicking out a crap load of emissions from the tailpipe. Now I can see this being changed as more and more EVs come onto the road, but that's just my personal opinion. This season we're looking at raising the awareness of carbon literacy with our listeners.

And one way we're doing that is with the carbon fact as read by carbon literacy trainer Anne Snelson.

AnneS:

For every one degrees centigrade increase in temperature, the air holds up to 7% more water. So if there's unlimited water nearby, like a sea or ocean, then warmer air will pick it up.

That means bigger droplets and more of them, meaning heavier, stronger, more frequent rain.

Gary C:

It's time for a cool EV or renewable thing to share with your listeners. Volkswagen has launched innovative bi-directional charging technology in Switzerland, enabling electric vehicle owners to utilise their cars as substantial mobile batteries.

This advancement not only enhances energy efficiency, but it also lets drivers support the grid during peak demand times. For the launch of the project, Volkswagen is enabling its electric vehicles from the ID series, including the ID. 3, ID.

4, ID. 5, ID. 7 and the ID.

Buzz, with batteries at least 77kWh for bi-directional charging via a software update. This is now coupled with Sun2Wheel's new 22kW Wallbox charging station that will be presented in Zurich at the AutoZurich on the 7th of November. Now it's not cheap, the Wallbox alone could cost almost £14,000.

But as with all these things, this cost will decrease over time.

I hope you enjoyed listening to today’s show.

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Thanks as always to my co founder Simon. You know [I ran into him at a recent industry event and he was looking hale and hearty - but he was itching a little bit about his Tesla Model Y and how it’s a great EV but not a particularly good car - a sentiment with which I happen to agree.

Of course you can’t really trust someone who thinks hooning around a path at high speed, balancing on a single wheel electric unicycle in all weathers is fun, can you?

But that’s just my personal opinion.

Thanks for listening.