Are EV Taxes Blocking EV Take-up?

In April 2025, the UK new car market shrank by 10.4%, with just 120,331 registrations, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). While the decline is partly seasonal – April is traditionally quieter following the March plate change – this month’s figures suggest something deeper: new tax changes may be undermining consumer confidence just when electric cars need momentum.

The most contentious change? Road tax now applies to many new EVs from 1 April 2025. In a fragile economy, the move appears to have pushed cautious buyers to pull forward their purchases into March, leaving April markedly subdued. But the bigger concern is whether these tax changes risk derailing the UK’s already-challenging zero-emission vehicle (ZEV) targets.

What Changed in April?

From 1 April 2025, all new EVs are now subject to VED, ending their long-standing exemption. In particular, the Expensive Car Supplement, which slaps an additional £390 per year for five years on cars with a list price over £40,000, now hits many electric vehicles for the first time.

Given the average price of a new EV remains high — with many family-friendly models priced above the £40,000 threshold — a large portion of the market is now affected. For example:

• A Tesla Model Y Long Range (from £44,990) will now attract the annual supplement.
• Even more affordable models, like the Hyundai IONIQ 5 Ultimate, tip over the £40k mark with options.

This effectively penalises buyers of cleaner cars, especially those seeking longer-range or better-equipped models. The timing could not be worse.

Evidence of a Shift

The SMMT’s April report provides compelling clues that the VED changes had a material impact:

• Registrations fell across all sales types: private (-7.9%), fleet (-11.9%), and business (-10.9%).
• New car registrations were down 13,943 units compared with April 2024.
• Compared to pre-pandemic April 2019, volumes were 25.3% lower.

While several factors are at play — including a late Easter and the wider economic backdrop — the clear message is that tax policy is influencing buyer behaviour. March saw a stronger performance, suggesting savvy consumers brought forward purchases to dodge the April hike.

Are EVs Still Growing?

Despite the headline drop, there was a silver lining: electric cars with a plug bucked the trend.

• Battery electric vehicles (BEVs) rose 8.1% to 24,558 units in April.
• Plug-in hybrids (PHEVs) saw an even stronger surge of +34.1%.
• Together, vehicles with a plug accounted for more than 1 in 5 (20.4%) of all new cars sold.

But there’s a catch: BEVs are still short of the 28% market share required under the UK’s Zero Emission Vehicle Mandate. This means that, even with growth, we’re not hitting the targets needed to stay on course for 2030 and 2035 bans on petrol and diesel cars.

The strong performance in plug-in hybrids may also reflect a trend toward hedging — consumers choosing PHEVs over full EVs due to range anxiety, charging infrastructure concerns, or now, higher taxes.

What’s the Real Cost of the Expensive Car Supplement?

Here’s what the VED supplement adds for a typical EV buyer over five years:

In a market already sensitive to price, an extra £390 a year can make a difference—particularly when combined with high interest rates and inflationary pressures.

The Case for Reform

The industry has responded quickly. The SMMT has called for the government to consider a suite of measures to support the EV transition:

• Halve VAT on new EV purchases to reduce upfront costs.
• Scrap or amend the Expensive Car Supplement for EVs to reflect their environmental benefit.
• Equalise VAT on public charging (currently 20%) with home charging (5%).

These aren’t just wish-list items. They’re policy levers that could close the gap between aspiration and uptake.

As of now, many would-be EV buyers are facing mixed messages. The government is demanding that more zero-emission vehicles are sold, yet it is also increasing the tax burden on those very vehicles. That tension is starting to show in the numbers.

Charging Fairness and EV Tariffs

Another area where EV drivers are feeling the pinch is energy costs—particularly for those who rely on public charging. With VAT still charged at 20% on public chargers, compared to 5% on home energy, drivers without driveways are effectively penalised for going electric.

For those able to charge at home, finding a competitive EV tariff remains the best way to keep costs down. Many energy providers now offer time-of-use tariffs that give access to ultra-cheap overnight electricity – ideal for EV charging.

For example, off-peak rates on some EV tariffs can be as low as 7.5p/kWh, compared to 30p+/kWh for standard daytime use or 60-80p/kWh at public rapid chargers.

If you’re charging at home and want to lower your energy bills, see our latest comparison of the best EV tariffs in the UK.

Final Thoughts: Mixed Signals Are Slowing the Shift

April’s car sales figures are a warning sign: policy needs to align with ambition. While the UK is making progress—BEVs now hold a 20.7% market share year-to-date—falling short of ZEV targets is a real risk.

If we are to meet these targets and maintain momentum, the government must address the growing mismatch between environmental goals and tax policy. That includes reconsidering the Expensive Car Supplement, fixing VAT disparities, and delivering consistent messaging that going electric is not just good for the planet, but also financially viable.

Because right now, EV buyers are being asked to pay more,and many are beginning to ask: is it worth it?

John Ellmore

John is the Editor and Spokesperson for Electric Car Guide.

With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.

John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.