PwC comments on EV taxation as next phase of changes take effect

Dom Tribe, Auto Sector Leader and Partner at PwC UK, said:

"Today marks a clear shift in how electric vehicles are treated within the UK tax system. The introduction of Vehicle Excise Duty and Benefit in Kind rates signal a shift away from incentivising EVs to normalising them. The price disparity between BEVs and ICE vehicles persists, currently sitting at around 15%, and the UK EV market continues to face pressure from cheaper international brands. However, the increase to the luxury car tax threshold from £40,000 to £50,000 (for EVs only), does take some steps to address this by improving the commercial viability of more models, recognising the price disparity. These economic mechanisms are necessary but do leave some remaining speed bumps for drivers and fleet owners looking to make the switch to an EV.

“The risk is that added complexity and rising ownership costs are landing as adoption rates are slowing and uneven. That challenge could be compounded by wider geopolitical pressures, with instability in the Middle East highlighting the UK’s exposure to global energy markets and the knock‑on effects for supply chains.

“Looking further ahead, the longer-term issue is how government navigates declining fuel duty revenues as EV uptake increases. Mileage‑based charging is planned to move from theory to policy reality in 2028, and its design will be critical in determining whether EVs remain an attractive and affordable choice for drivers and fleets.

“For the transition to stay on track, policy needs to be predictable, proportionate and aligned with how people actually use vehicles, particularly for smaller, cheaper cars and commercial users where cost sensitivity is highest.”