Labour is mulling a evaluate or probably abolishing the Costly Automotive Complement (ECS) – the so-called “Tesla tax” – in a transfer that would considerably increase electrical car (EV) adoption.
Launched in 2017, the ECS imposes an extra £425 annual cost on automobiles with a listing value over £40,000, relevant for 5 years after the second 12 months of registration – including £2,125 on prime of the £195 commonplace Automobile Excise Responsibility (VED), totalling £3,100 throughout the interval.
As of April 1, 2025, EVs – beforehand exempt – have been introduced into scope for each VED and the ECS, drawing criticism from trade leaders who argue the tax is outdated and penalises drivers amid rising automotive costs and cost-of-living pressures.
Many well-liked EVs now exceed the £40,000 threshold, largely resulting from inflation and manufacturing prices.
A leaked letter from roads minister Lilian Greenwood, seen by Auto Categorical, reveals Labour is actively contemplating elevating or scrapping the ECS for zero-emission automobiles, acknowledging its “disproportionate affect” on EV consumers.
“We’ll contemplate elevating the brink for zero emission automobiles solely at a future fiscal occasion to make it simpler to purchase electrical automobiles,” Greenwood wrote in response to Liberal Democrat MP Ben Maguire.
This coverage rethink comes amid concern that falling EV gross sales – partly blamed on the ECS – may forestall producers from assembly the Zero Emission Automobile (ZEV) mandate, exposing them to substantial fines.
The ECS threshold of £40,000 has not been revised since its inception, regardless of seven years of inflation. Specialists argue the fashionable equal can be nearer to £50,000, that means extra mainstream automobiles – not simply high-end luxurious automobiles – are being caught by the cost.
Labour’s potential transfer, anticipated to characteristic within the Autumn Funds, is probably going geared toward boosting EV uptake and aligning with the Authorities’s internet zero ambitions.
“There isn’t any discount within the Authorities’s ambition to decarbonise automobiles and vans,” Greenwood said, reaffirming help for the ZEV mandate whereas suggesting focused tax reduction to assist ease adoption.
The Society of Motor Producers and Merchants (SMMT) earlier this 12 months known as for the ECS to be scrapped for EVs following months of decline within the new automotive market, insisting that its utility had comed “on the worst time for the trade”.
Electrical automotive consumers are thrice extra more likely to be hit by the luxurious automotive tax in comparison with petrol or diesel drivers underneath new car excise obligation (VED) guidelines, in line with on-line market Auto Dealer evaluation.
