New car tax rules set to impact millions of road users within months could have a “significant impact” on demand for certain models, according to experts.

Electric cars will pay Vehicle Excise Duty (VED) for the first time next spring after years of road users dodging fees.

Electric vehicle owners will pay a heavily discounted first-year VED rate of just £10 per year before switching to the standard annual rate.

However, there is some concern over the ‘Expensive Car Supplement’ (ECS), an extra charge slapped onto motorists with models valued at over £40,000. 

This extra fee is expected to rise from its current £410 charge to £425 by next April, raising total tax bills for many EV owners above the £600 per year mark.

Specialists at Plus Accounting said: “Extending the “expensive car supplement” to electric vehicles will significantly impact demand.

“From April 2025, EVs with a list price above £40,000 will incur an additional VED of £425 annually for five years, starting from the second year of ownership.

“This is in addition to the standard VED rates. Industry experts argue that the £40,000 threshold does not reflect luxury for EVs due to their generally higher costs than petrol or diesel cars.”

Traditionally, the ECS was paid by only the top-end petrol and diesel models but the hefty price tag of middle-market EVs means many more will now pay.

It has previously been suggested that almost three-quarters of brand-new EVs could be subject to the extra fee.

It comes as EV sales are predicted to increase significantly next year with millions more vehicles added onto UK roads.

AutoTrader, the leading new and used car marketplace, has predicted EV sales could jump by 33% in 2025, reaching 1.66 million.

Experts at NewAutomotive feel EV numbers could jump by between 20%-30% by the end of 2024, adding an extra 1.3 million to UK streets.

Plus Accounting added: “Industry experts have expressed concerns about the impact of these changes on the adoption of electric vehicles.

“The Society of Motor Manufacturers and Traders (SMMT) indicates that 70% of new EVs will be subject to the luxury tax, potentially discouraging families and businesses from transitioning to electric cars.

“Critics urge the Government to rethink the policy to support the shift to green vehicles better.”

Earlier this year, the SMMT called for EV tax breaks to boost demand – with a 50% VAT reduction understood to be the most popular incentive to encourage drivers to switch.

Meanwhile, they stressed that VED reform was also urgently needed to avoid “disincentivising EVs”.