The new Autumn budget has been announced today (Thursday 17th November 2022) and, as predicted, electric vehicle owners will now be charged road tax (also known as Vehicle Excise Duty or VED) for the first time ever from 2025.
So, what does that mean for you if you currently drive an electric vehicle? What does it mean if you’re looking to switch to driving electric, and how will it affect leasing an electric vehicle?
What Does The New Budget Include?
Some of the key budget announcements include:
**Electric Vehicles To Pay Road Tax: **
- Electric vehicles will pay Vehicle Excise Duty from April 2025 to make the motoring tax system “fairer”. Rates are yet to be announced.
**Energy Bills Rising: **
- Help for energy bills will be extended, but it will be less generous. Households will see their energy bills go up by hundreds of pounds a year from April. A household using a typical amount of gas and electricity will pay £3,000 annually, up from £2,500, as the Energy Price Guarantee rises.
**Personal Tax Rises: **
The threshold for the highest earners will be brought down from £150,000 to £125,140. This means that those earning £150,000 or more will pay just over £1,200 more a year.
The income tax personal allowance threshold will remain frozen until 2028 meaning millions of people will end up paying more in tax. The thresholds were already frozen until 2026.
Cost Of Living Support:
- For those on low incomes, disability benefits and pensioners, additional payments of £900 will be paid to those on means-tested benefits, £300 to pensioner households and £150 to people on disability benefits.
National Living Wage Rise:
- The National Living Wage will be increased from £9.50 an hour for over-23s to £10.42 from April next year.
__Pensions Rise: __
- Pensions will rise in line with September's inflation rate of 10.1%.
__Energy Company Windfall Tax: __
- The energy industry will undergo a windfall tax of 35% up from 25% from 1 January until March 2028. There will also be a temporary 45% levy on electricity generators. These taxes will raise an expected £14bn next year.
Benefits & Pensions:
- £280m will be invested to help the Department of Work and Pensions to crack down on benefit fraud and errors in the next two years.
__Education Investment: __
- In 2023 and 2024, the government will invest an extra £2.2bn in schools.
NHS Budget Increase:
- The NHS budget will be increased in each of the next two years by £3.3bn.
__Scotland, Wales & Northern Ireland: __
- An ongoing extra £1.5bn funding for the Scottish government, 31.2bn for the Welsh government and £650m for the Northern Ireland executive has been promised annually.
What Does The Budget Mean For Drivers?
Right now, there will be no VED tax charge for electric drivers. This will not come into effect until 2025, which means if you’re already driving electric, you won’t be affected for a few years. So, you still have some time left to enjoy VED-free driving.
For those looking to switch to an electric vehicle from an ICE (internal combustion engine) vehicle, it may mean factoring in slightly higher costs from 2025. As the general price point on electric vehicles tends to be more expensive than ICE vehicles, and with higher taxes generally and lower disposable income, it’s understandable why more customers may think twice about making the switch.
However, electric vehicles offer a range of benefits including being better for the environment and having much lower running costs, especially if you have access to a charge point at home - which is still around 50% cheaper than fuelling an ICE car. All Vanarama electric vehicle leases come with a free electric home charger (including installation) as standard*. Some workplaces are also installing electric chargers that are free to use, so you can plug in when you park and charge up while you work.
How Does The Budget Affect Leasing?
If you’re looking to switch to an electric vehicle, leasing may be your best bet to drive VED-free for longer. VED payments are included in your monthly lease payments and these are fixed for the term of your lease. So if you take, for example, a five-year lease deal, you could have an extended period driving VED free into 2025 and beyond, unlike those who choose to buy.