As electric vehicles (EVs) become increasingly popular in the UK, there’s no doubt that the driving landscape is changing.
With this shift, however, comes a need to understand how road tax applies to EVs. For years, one of the major benefits of going electric was avoiding the standard road tax fees, which traditionally applied to petrol and diesel vehicles.
But with EV adoption on the rise, changes are on the horizon. Here’s what you need to know about road tax on electric cars in the UK to keep your finances and your vehicle in check.
For the full government guidance on Road Tax on electric cars, check here.
What is Road Tax, and Why is it Changing?
In the UK, road tax, officially known as Vehicle Excise Duty (VED), is a fee for using public roads, contributing to road maintenance and environmental initiatives. Traditionally, VED has been based on a vehicle’s CO₂ emissions, with higher-polluting vehicles paying more.
Electric cars, which have zero tailpipe emissions (zero emissions cars), have enjoyed exemptions from road tax as a way to encourage more sustainable transportation.
But as EV ownership grows, the UK government is adjusting policies to ensure everyone contributes fairly to the road network and pay road tax, even if they’re driving an eco-friendly vehicle.
The Current Road Tax Exemption for EVs
At the time of writing, fully electric cars are exempt from VED. This means if you own a fully electric vehicle (not a hybrid), you currently don’t need to pay any annual road tax. This exemption has been a major factor for many UK drivers switching to electric.
This exemption, however, doesn’t apply to hybrid vehicles. Hybrids have lower emissions than petrol or diesel-only vehicles, but they still use fossil fuels, so they’re subject to road tax, though often at a reduced rate based on their CO₂ emissions.
Upcoming Changes in 2025: Road Tax for EVs
In the UK government’s 2022 Autumn Statement, Chancellor Jeremy Hunt announced that from April 2025, electric vehicles will no longer be exempt from VED. This change is set to make EV ownership more financially sustainable for the government, given the loss of revenue as more drivers move away from petrol and diesel vehicles.
How Will VED for Electric Vehicles Work After 2025?
- Standard Rate for Electric Cars: Starting April 2025, new and existing electric cars will be subject to VED in the same way as petrol and diesel vehicles.
- First-Year Rate: In the first year, new electric cars will have to pay the same rate as the lowest-emission vehicles, currently set at around £10 (this rate could adjust before 2025).
- Subsequent Years: In the years following, electric car owners will move to a “standard rate” VED, which is expected to be in line with the £165 annual fee currently paid by the lowest-emission petrol and diesel vehicles.
This shift means that by 2025, owners of fully electric cars will need to budget for road tax, though the annual amount is likely to remain less than that of higher-emission vehicles.
Road Tax and Luxury Electric Vehicles
The UK also applies an additional VED charge, sometimes called the “expensive car supplement,” for vehicles with a list price of over £40,000. This rule will apply to electric vehicles from 2025 as well.
If your electric car has a list price over £40,000, you’ll need to pay an extra £355 annually for five years, starting from the second year of ownership. This additional tax applies to many of the popular higher-end EVs on the market, such as some Tesla, Audi, and BMW models, so it’s worth considering if you’re looking at premium options.
Are Plug-in Hybrids Affected?
Yes, plug-in hybrid cars and alternative fuel vehicles are also subject to changes under the 2025 VED adjustment.
Like electric vehicles, hybrids will transition to paying a standard VED rate. However, they’re already taxed based on their CO₂ emissions, so while they won’t see as significant a shift as electric cars, plug-in hybrid owners can expect the same standard VED rate to apply.
The Pros and Cons of Paying Road Tax on EVs
While the introduction of VED for EVs may feel like a drawback, it’s important to weigh it against the broader benefits of owning an electric car.
Pros:
- Fuel Savings: Electricity is still significantly cheaper than petrol and diesel cars, allowing EV drivers to save on fuel costs.
- Environmental Benefits: EVs produce no tailpipe emissions, which means cleaner air and a smaller carbon footprint.
- Reduced Maintenance Costs: EVs often have fewer moving parts and require less maintenance than traditional vehicles.
Cons:
- Increased Running Costs: The new VED rates will increase the cost of ownership, potentially affecting long-term savings for some drivers.
- Potential Surcharge for High-End EVs: The additional charge for luxury electric cars could add up over five years.
Preparing for Road Tax on Your Electric Car
If you’re planning to buy an EV or already own one, here’s how to prepare for these changes:
- Budget Accordingly: If your EV will be affected by the 2025 road tax change, start planning for the added annual expense. It may be worthwhile to save a small monthly amount toward covering this future tax.
- Consider Incentives and Grants: Although VED exemptions are set to end, other government grants and incentives are available for EVs, including home charging grants and workplace charging schemes.
- Stay Informed: Policy on EV taxation may continue to evolve as the UK inches closer to its 2030 ban on the sale of new petrol and diesel vehicles. Keep an eye on government announcements to stay up-to-date with any future changes.
Is Going Electric Still Worth It?
Even with the 2025 VED changes, going electric still brings substantial benefits, especially in terms of fuel savings, lower maintenance costs, and environmental impact. The government continues to support EV infrastructure growth, including a more robust charging network across the UK, which is helping make EV ownership more practical and accessible for drivers nationwide.
In the bigger picture, as road tax for EVs becomes a reality, it’s worth remembering that this shift is part of an overall move toward sustainable transportation. With the government striving for net-zero emissions, contributing a fair share through road tax is part of the evolving responsibility of UK motorists as the country moves toward a cleaner future.
