The UK automotive industry is urging the Chancellor to use next week’s Budget to make vital tax breaks to boost EV demand and drive net zero plans.

A three-point plan of EV tax reform would recharge the market and accelerate the UK’s progress towards net zero.

New research shows would-be EV buyers are rowing back on plans to go electric – but the Society of Motor Manufacturers and Traders (SMMT) says a three-point plan of tax reform would recharge the market and accelerate the UK’s progress towards net zero.

It’s calling for the Treasury to halve VAT on new EVs, change upcoming Vehicle Excise Duty rates so EVs are treated as essentials, not luxuries, and give drivers more affordable public charging.

The changes are seen as vital to put EVs “back in the fast lane”. New research commissioned by the SMMT from Savanta has found that rising numbers of would-be EV drivers are now likely to delay their switch to a battery electric car due to the Government’s decision to push the ICE ban back from 2030 to 2035.

Almost one in four drivers (24%) are now delaying their plans, while one in seven (14%) say they now won’t ever make the switch.

While the UK remains Europe’s second largest new electric car market by volume with the actual number of EVs on UK roads rising, the rate of growth has slowed and EV market share has stabilised.

Delve deeper and the figures show EV growth is being sustained by fleets and businesses, which benefit from compelling tax incentives. In contrast, private retail uptake has been in decline since 2022 – with these buyers now accounting for fewer than one in four new EV registrations, compared with one in three previously.

This change in sentiment puts delivery of the UK’s net zero goals in jeopardy. Almost half (46%) of would-be EV buyers will now wait until after 2030 to switch – compared with just one in 10 (11%) last year, just before the Government announced the ICE ban delay.

In the latest survey, almost three-quarters (73%) of consumers named vehicle affordability, charge point availability, or charge point costs as being their biggest barrier to going electric.

A 50% cut on VAT would be the most popular incentive for drivers to switch. Almost four in 10 drivers (37%) interested in going electric said a VAT cut would accelerate their plans – and even a quarter of drivers (26%) who weren’t interested in switching named it as the option most likely to change their mind.

Vehicle Excise Duty (VED) reform is also needed to avoid disincentivising EVs. Forthcoming changes to VED due in 2025 – announced before the pandemic, economic downturn and weakening of EV demand – will result in around seven in 10 currently sold EVs being subject to an ‘expensive car’ VED supplement from next year. This would mean EV purchasers would effectively be penalised a total of £1,950 for choosing to buy an electric car – a choice which new mandated EV sales targets are intended to encourage.

The auto sector – along with many others – also wants to see a public charge point VAT cut, with VAT reduced from 20% to 5%, in line with home charging.

Mike Hawes, SMMT chief executive, said: “The Budget is a crucial opportunity to re-energise the EV market, with fair tax for a fair transition. The Chancellor must end the perverse fiscal system that discourages drivers from moving away from fossil fuels and send a clear signal that the time to go electric is now.

“Success will see our economy powered up by zero-emission mobility, delivering cleaner air, quieter roads and cheaper running costs, ending the uncertainty we are seeing amongst motorists.”