Labour is mulling a review or potentially abolishing the Expensive Automotive Complement (ECS) – the so-called “Tesla tax” – in a move that might significantly boost electric vehicle (EV) adoption.
Introduced in 2017, the ECS imposes a further £425 annual charge on vehicles with an inventory price over £40,000, applicable for five years after the second 12 months of registration – adding £2,125 on top of the £195 standard Vehicle Excise Duty (VED), totalling £3,100 across the period.
As of April 1, 2025, EVs – previously exempt – have been brought into scope for each VED and the ECS, drawing criticism from industry leaders who argue the tax is outdated and penalises drivers amid rising automotive prices and cost-of-living pressures.
Many popular EVs now exceed the £40,000 threshold, largely as a consequence of inflation and production costs.
A leaked letter from roads minister Lilian Greenwood, seen by Auto Express, reveals Labour is actively considering raising or scrapping the ECS for zero-emission vehicles, acknowledging its “disproportionate impact” on EV buyers.
“We’ll consider raising the brink for zero emission cars only at a future fiscal event to make it easier to purchase electric cars,” Greenwood wrote in response to Liberal Democrat MP Ben Maguire.
This policy rethink comes amid concern that falling EV sales – partly blamed on the ECS – could prevent manufacturers from meeting the Zero Emission Vehicle (ZEV) mandate, exposing them to substantial fines.
The ECS threshold of £40,000 has not been revised since its inception, despite seven years of inflation. Experts argue the trendy equivalent could be closer to £50,000, meaning more mainstream vehicles – not only high-end luxury cars – are being caught by the charge.
Labour’s potential move, expected to feature within the Autumn Budget, is probably going geared toward boosting EV uptake and aligning with the Government’s net zero ambitions.
“There is no such thing as a reduction within the Government’s ambition to decarbonise cars and vans,” Greenwood stated, reaffirming support for the ZEV mandate while suggesting targeted tax relief to assist ease adoption.
The Society of Motor Manufacturers and Traders (SMMT) earlier this 12 months called for the ECS to be scrapped for EVs following months of decline in the brand new automotive market, insisting that its application had comed “on the worst time for the industry”.
Electric automotive buyers are 3 times more prone to be hit by the posh automotive tax in comparison with petrol or diesel drivers under recent vehicle excise duty (VED) rules, in response to online marketplace Auto Trader evaluation.
This Article First Appeared At www.am-online.com
