Many fleet managers running electric or plug-in hybrid vehicles are not aware that their costs will jump significantly in April due to new Vehicle Excise Duty (VED) rates.

That’s the new of the Association of Fleet Professionals (AFP), following feedback from its members that suggests they are not ready for increases announced by the Chancellor of the Exchequer in the Budget last year.

The measures are likely to have an impact on organisations that operate electric vehicles (EVs) and plug-in hybrids (PHEVs), and some will see their liability on widely-adopted EVs rise per vehicle from zero to £2,490 over a five-year period.

While first-year VED rates are being increased from zero to £10 for EVs and from zero to £110 for PHEVs emitting between 1-50g/km of CO2, second year rates have risen more dramatically for EVs – from zero to £195.

EVs that are registered from 1st April will now also become liable for additional rate VED charged on all vehicles costing more than £40,000, the ‘Expensive Car Supplement’ which will be £425 for each of the second to the fifth years of the car’s life.

The vast majority of EVs sit above the £40,000 limit and the industry has made calls for it to be adjusted for such vehicles – earlier this month business mobility and service provider Alphabet argued that the EV limit should come in at £60,000 and then reduce each year as more affordable EVs come onto the market (Insight here).

According to AFP director James Pestell, feedback received by the Asssociation indicates that many fleets simply haven’t appreciated and accounted for these increases, which he describes as substantial when applied across entire fleets operating dozens, hundreds or thousands of EVs and PHEVs.

“From April onwards, they’ll be receiving bills from the DVLA or shortfall invoices from their leasing supplier, and won’t have factored them into their running costs – that’s why we are flagging up this issue now,” Pestell said.

He added that taken together, the VED increases represented a major jump in costs for EVs.

“Electric cars costing over £40,000 bought after the start of April – including some of the most common models on fleets – that would have attracted no tax in 2024-25 will be liable for £2,490 (£10 VED in the first year, followed by four years of £195 VED and £425 of additional tax) during the first five years of their life. That’s a big increase.”

The AFP will be holding a Tax Year End webinar on Tuesday 4th March at 10am, featuring tax specialist Harvey Perkins of HRUX and mileage reimbursement expert Barry Monks of TMC. It will cover VED issues and more including the P11D process, PHEV benefit-in-kind changes, double-cab pick ups (which are set to bee their taxation rates vastly increase in April), car allowance payments, what is a business mile, and CO2 tax changes from 2028. More details can be found here.