Labour is under pressure to scrap the £200 annual car tax on electric vehicles. The National Franchised Dealers Association (NFDA) has written to Treasury Minister Dan Tomlinson urging the government to remove Vehicle Excise Duty (VED) requirements for electric cars.
The NFDA warns that introducing the charge risks slowing the growing demand for electric vehicles. Sue Robinson, chief executive of the NFDA, said: "We are seeing a clear shift in consumer interest towards electric vehicles, driven in part by higher fuel prices. This is exactly the moment when Government support can make a real difference, not add extra cost."
For most electric car drivers, the cost of road tax (VED) in 2026 is £200 per 12 months. Drivers of more expensive EVs also have to pay an Expensive Car Supplement, or 'Luxury Car Tax,' annually for five years. This adds £440 a year from the second year of the car's registration, taking the total annual VED up to £640.
The Expensive Car Supplement previously applied to all cars with a list price over £40,000. However, this threshold was increased to £50,000 in November 2025, but only for electric cars, allowing more EVs to be exempt from the extra charge.
Robinson added: "Removing the £200 annual charge would be a simple step that helps keep momentum going and gives consumers more confidence to make the switch."
From April 2028, a pay-per-mile tax on both electric and plug-in hybrid cars is being introduced as part of an effort to address the loss in fuel duty from increasing EV sales. This self-reported tax, dubbed 'eVED', will see electric car drivers charged at a rate of 3p per mile, and plug-in hybrid (PHEV) drivers charged at 1.5p per mile.
