► No more free road tax for EVs
► Luxury vehicle tax could further add to costs
► EVs still cheaper to run than petrol/diesel
The government's Autumn 2024 Budget is out, and in addition to the new tax rates for petrol and diesel drivers, there's news for electric car drivers.
From April 1, 2025, drivers of electric cars will have to pay road tax or VED (Vehicle Excise Duty).
Yep, no more get-out-of-jail-free cards. Planned by Jeremy Hunt back in 2022, the changes were recently announced by Rachel Reeves, Chancellor of the Exchequer.
Thanks Rachel . . .
How Does Electric Car Tax Work Now?
Technically, you've always had to road tax electric cars.
But the cost for doing it has always been £0, making it more of a form-filling formality than anything else (and with leasing the ‘costs’ are included in the monthlies so you don't even need to fill out a form).
So Why the Change?
Money.
Basically, as more and more drivers make the switch to electric vehicles, that means the government receives less and less money in tax payments, with the Treasury estimating that keeping EV tax at £0 would cost in the region of £35 billion per year.
Either way, it couldn't have gone on forever, especially as the 2035 ban on the sale of new petrol and diesel vehicles creeps nearer. The change aims to make the system "fair" for all motorists.
Similar to other funds that the government gathers in tax, the money will be spent on various national and infrastructure needs, including maintaining the roads themselves.
Alright, What Will I Pay?
Here are the new rates . . .
New zero-emission cars registered on or after 1 April 2025
For the 1st year of registration, the lowest first-year rate of vehicle tax (which applies to vehicles with CO2 emissions of 1 to 50g/km) will apply, and it's currently £10 a year, but that amount is subject to change for 2025.
From the 2nd year of registration onwards, you'll pay the standard rate, currently £190 a year.
Zero emission cars first registered between 1 April 2017 and 31 March 2025
Drivers of these electric cars will also pay the standard rate.
Zero and low emission cars first registered between 1 March 2001 and 30 March 2017
Which are currently in Band A will move to the Band B rate – currently £20 a year.
What if I'm Exempt?
If you are exempt from road tax due to disabilities or any other reason, that will continue to be the case unless the government announces otherwise in the near future.
What About Hybrid and Alternatively-fuelled Vehicles (AFVs)
Not as bad news for drivers of hybrid cars, but still not so good.
The £10 annual discount for hybrid cars and AFVs will be removed, and the rate you pay will depend on what date your electric car was first registered. If the vehicle was:
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Registered before 1 April 2017, the rate you pay will depend on the vehicle’s CO2 emissions ([check the current rates[(https://www.gov.uk/vehicle-tax-rate-tables))
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Registered on or after 1 April 2017, you will pay the standard rate (currently £190 for 2024 but is subject to change for 2025)
Electric Vans
Drivers of electric vans will have their own rates for the 2025-26 tax year.
Electric Motorcycles
Tax on electric motorcycles (and tricycles) will move to the annual rate for the smallest engine size.
You can check the current rates for this class of vehicle.
Luxury EV Tax
Now for the very bad news.
Officially known as the Expensive Car Supplement, this charge already applies to all drivers of new petrol and diesel vehicles with a retail cost of £40,000 or above (including specific trim levels), but it's going to be rolled out for EV drivers too.
The current cost is £410 per year for 5 years following the first year of the vehicle’s registration, and it is paid IN ADDITION to standard car tax, meaning that a substantial number of electric car drivers could pay up to £600 in total per year.
The reason we say "substantial" is because the majority of electric cars are in fact priced at £40k or above. For example, the Tesla Model Y starts at £46,990, so bad news if you're a Model Y driver. Or a Porsche Taycan driver, or a Ford Mustang Mach-E driver, or . . . yeah, you get the picture.
In fact, it's estimated that around 67% of electric vehicles exceed the £40,000 threshold and will be liable for the luxury tax.
You'll also be required to pay the Expensive Car Supplement if you drive any of these popular electric cars with a £40k+ retail cost։
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MG4 EV
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Audi Q4 e-tron
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Tesla Model 3
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Polestar 2
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Volkswagen ID.3
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Kia Niro Electric
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BMW i4
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Volkswagen ID.4
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SKODA Enyaq iV
Will I Be Affected If I Lease My Car?
Yes, but because road tax costs are incorporated into the monthly payments, you'll have less work to do and won't have to arrange any one-off payments.
Same goes with the Expensive Car Supplement charge (if applicable).
Why Electric Vehicles Still Make Financial Sense
These changes might be an unwelcome surprise, but there's still plenty of benefits to be had with driving an electric vehicle – benefits that arguably outweigh the extra dollar you'll have to pay in tax.
Fuel savings: Electric power is still cheaper than petrol and diesel, especially if you have a home charger, which can cost as little as 7p per kWh during off-peak hours.
Maintenance savings: Electric cars have fewer moving parts so there's less that can go wrong mechanically, meaning less £££ spent on repair bills.
Silent drive: No more noisy engines or visits to stinky petrol stations.
Summary
So the situation’s far from doom and gloom, but it is important that you check your vehicle's tax status ahead of time to avoid any unwelcome surprises. And if you don't want to have to pay the Expensive Car Supplement, it might be worthwhile looking into a cheaper electric car (yes, they do exist).
A good place to start looking is our electric car lease deals page, which lets you filter from lowest to highest price.
FAQs
How much is road tax on electric cars?
Currently, drivers of electric cars do not have to pay anything when it comes to road tax, even though the vehicle still needs to be taxed.
Will all electric cars pay road tax in 2025?
Pretty much. Drivers of all electric cars will be required to pay road tax from 2025, with the exception of those exempt due to medical or other reasons.
How much will EV tax be in 2025?
Drivers of new zero-emission cars registered on or after 1st April 2025 will pay the lowest first-year rate of VED (applicable to vehicles with CO2 emissions of 1 to 50g/km), which is currently £10 a year. From the second year of registration onwards, they will afterward move to the standard rate, currently £190 a year.