Leak reveals Labour eyeing budgetary reform of ‘Tesla tax’
Labour is mulling a overview or probably abolishing the Costly Automobile 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 an inventory worth over £40,000, relevant for 5 years after the second 12 months of registration – including £2,125 on high of the £195 normal Car Excise Obligation (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– have been introduced into scope for each VED and the ECS, drawing criticism from trade leaders who argue the tax is outdated and penalises drivers amid rising automobile costs and cost-of-living pressures.
Many standard EVs now exceed the £40,000 threshold, largely attributable to inflation and manufacturing prices.
A leaked letter from roads minister Lilian Greenwood, seen by Auto Specific, reveals Labour is actively contemplating elevating or scrapping the ECS for zero-emission automobiles, acknowledging its “disproportionate impression” on EV patrons.
“We are going to contemplate elevating the brink for zero emission vehicles solely at a future fiscal occasion to make it simpler to purchase electrical vehicles,” 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 Car (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. Consultants argue the trendy equal could be nearer to £50,000, which means extra mainstream automobiles – not simply high-end luxurious vehicles – are being caught by the cost.
Labour’s potential transfer, anticipated to function within the Autumn Funds, is probably going aimed toward boosting EV uptake and aligning with the Authorities’s internet zero ambitions.
“There isn’t a discount within the Authorities’s ambition to decarbonise vehicles 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 referred to as for the ECS to be scrapped for EVs following months of decline within the new automobile market, insisting that its software had comed “on the worst time for the trade”.
Electrical automobile patrons are thrice extra more likely to be hit by the posh automobile tax in comparison with petrol or diesel drivers below new car excise responsibility (VED) guidelines, in keeping with on-line market Auto Dealer evaluation.
