The UK government’s decision to end Vehicle Excise Duty (VED) exemptions for electric vans has raised concerns about the potential impact on businesses aiming to reduce their environmental footprint. The new tax rates, which came into effect on April 1, mark a significant shift in policy by taxing electric vans for the first time.
Industry experts warn that this change could hinder the government’s net zero ambitions, particularly in areas where clean air policies have successfully promoted the adoption of electric vans. A recent report highlighted a 485% year-on-year increase in business inquiries about electric vans, suggesting a growing interest in greener transportation options. However, the new taxation could affect initial budgeting for companies considering switching to electric vehicles.
Under the new VED rates, light goods vehicles registered after March 1, 2001, and weighing up to 3,500kg will face a standard annual rate of £345. Euro 4 and Euro 5 compliant light goods vehicles will be charged £140 for 12 months. This change is particularly significant for businesses that have invested in electric fleets to reduce emissions and operating costs.
The South East of England has emerged as a hotspot for electric van adoption, with 31,782 electric vans registered in the region. This growth has been linked to the creation of Clean Air Zones and Low Emission Zones. Similarly, the South West region has seen an increase in electric van numbers, particularly in areas like Bath and Bristol where Clean Air Zones are in place.
Mike Fazal, CEO of Leasing.com, noted that while the VED changes might impact adoption rates, electric vans still offer considerably cheaper running costs compared to their internal combustion engine counterparts. He also highlighted upcoming licensing reforms that will allow standard driving license holders to operate zero-emission vehicles up to 4.25 tonnes, addressing a previous issue where electric vans were classified as HGVs due to their heavy battery weight.
The government has extended the Plug-in Van Grant for another year to support businesses transitioning to electric vehicles. Eligible van drivers and businesses can receive grants of up to £2,500 for small vans (up to 2.5 tonnes) and up to £5,000 for larger vans (up to 4.25 tonnes).
Despite this support, small businesses and tradespeople in areas with Clean Air Zones face challenging decisions as they balance environmental compliance with increased taxation. Councils in various regions, including St Albans, Wokingham, and Sefton, have considered implementing new Low Emission Zones, which could further drive up electric van numbers. However, the new VED rates may slow this momentum as drivers juggle car tax payments with new road charges.
