Road Tax on Electric Cars

Currently in 2023, if you own an electric car in the UK, you do not have to pay road tax. The exemption of EVs from the Vehicle Excise Duty (VED) is a major financial incentive provided by the UK government to encourage the ownership of electric cars.

This favourable road tax has been useful in making EVs a financially attractive option for potential car owners. In essence, the government’s message has been clear: choose a greener mode of transport, and you’ll be rewarded with financial benefits. This is still visible in other government incentives, such as lower BIK rates and exemptions from Clean Air Zone charges.

However, given the increasing number of EVs on the roads, there are proposed changes on the horizon starting from April 2025. In this guide to UK Road tax for EVs we review the current road tax situation for electric cars and consider impending changes and their impact on EV owners.

Road Tax exempt Tesla Model X with doors up

Do Electric Cars pay road tax?

Electric cars are currently fully exempted from Vehicle Excise Duty (VED) in the UK, so they do not pay road tax. EVs do not pay road tax because the government is pushing us towards more eco-friendly transportation in order to reduce the nation’s carbon footprint.

To qualify for this exemption, the electric vehicle must meet specific criteria: it should get its electricity from an external source, such as a public or private
home charger, an electric storage battery that isn’t connected to any power source while the vehicle is in motion, or through hydrogen fuel cells.

Hybrids are not eligible for this full exemption and are subject to their own VED rates based on their CO2 emissions.

What is road tax (Vehicle Excise Duty VED)?

Vehicle Excise Duty (VED), often referred to as “road tax” or “car tax”, is a tax on any vehicles that are used or kept on public roads in the United Kingdom. VED was introduced in 1888, its primary purpose was to generate revenue for the government.

Over time, however, the tax evolved to help the government promote environmental policies, by linking the amount payable to the level of CO2 emissions produced by the vehicle.

How is road tax calculated?

The way road tax is calculated has evolved over the years, reflecting the government’s commitment to environmental causes:

  • CO2 Emissions
    The cornerstone of the VED calculation is a vehicle’s CO2 emissions. Vehicles are placed into bands based on how many grams of CO2 they emit. Generally, the higher the emissions, the higher the tax rate.

    For cars first registered on or after 1 April 2017, there’s a specific rate for the first year, often referred to as the ‘first-year rate’. After this, a standard rate applies.

    Diesel cars that don’t meet the latest Euro 6d emission standards will pay a higher rate in the first year than petrol and hybrid cars.

  • Vehicle List Price
    For cars registered after 1 April 2017 with a list price (the published price before any discounts) of more than £40,000, an additional rate is charged on top of the standard rate for five years. After this period, they revert to the standard rate. This is often referred to as the ‘expensive car supplement’.

  • Vehicle Type and Age
    Different types of vehicles have distinct VED bands. For instance, motorcycles, vans, and lorries have their own sets of rates. Older vehicles, particularly those registered before 1 March 2001, are taxed either based on their engine size or fuel type due to the lack of widespread CO2 data at the time.

How much is road tax for an Electric Car?

Given the current exemption from VED, road tax for electric cars is currently £0. While the road tax is currently non-existent for electric vehicles, there are other costs and considerations that prospective EV owners should take into account, such as a higher initial purchase price and the cost of installing a home charger. The current rate of road tax for electric cars is going to change for EV owners in the next few years.

When will electric cars pay road tax?

From April 2025, the UK government plans to introduce road tax for EVs with changes to the Vehicle Excise Duty (VED) system. These changes are aimed at equalising the VED treatment of both zero-emission vehicles, like electric cars, and traditional petrol or diesel vehicles.

The 2025 EV road tax rule changes explained

From April 2025, significant changes to the Vehicle Excise Duty (VED) for electric vehicles (EVs) and alternatively fuelled vehicles (AFVs) are set to be introduced in the UK. Here’s an overview of what’s coming:

  • Equalisation of VED for All Vehicles
    The new measures aim to provide equal VED treatment between zero-emission vehicles (like electric cars) and internal combustion engine (ICE) vehicles. This change will apply to both existing and new alternatively fuelled vehicles.

  • First Year Rate for New EVs
    Electric cars that were first registered on or after 1 April 2017 will be subjected to the lowest first-year rate of VED. This rate is akin to what vehicles with CO2 emissions between 1 to 50g/km currently pay.

    Following the first year, these electric vehicles will transition to a standard annual VED rate.

  • Expensive Car Supplement
    The exemption from the Expensive Car Supplement, which currently benefits EVs, will cease in 2025. This means that all new electric vehicles registered on or after 1 April 2025 and priced at £40,000 or above will need to pay this supplement.

  • Rates for Vans, Motorcycles, and Tricycles
    Zero-emission vans will align with the standard annual VED rate set for petrol and diesel light goods vehicles. Electric motorcycles and tricycles will be subjected to the annual VED rate consistent with the smallest engine size category. There is no mention of electric HGVs in the government’s upcoming road tax changes.

  • Rates for AFVs and Hybrids
    The annual discount that was available for other alternatively fuelled vehicles and hybrids will be removed, making their VED rates equal to traditional vehicles.

  • Government’s Policy Objective
    These changes aim to ensure every driver pays a balanced tax contribution. The introduction of VED for EVs and the adjustments to AFVs and hybrids aim to integrate them into the broader motoring tax system.

    Despite these changes, the government remains committed to supporting the transition to EVs. They will continue to provide favourable VED rates for low-emission vehicles, advantageous company car tax rates, and other incentives such as capital allowances for EV equipment and advantageous salary sacrifice schemes for electric cars.
     
  • Impact on the Exchequer
    The government expects revenue boosts in the subsequent years. The projected revenue from these changes is £515m in 2025-26, £985m in 2026-27, and £1.595bn in 2027-28.

  • Impact on EV owners
    If you own an electric car, van, or motorcycle then you will be directly impacted by these measures. They will need to start paying VED on their vehicles from 1 April 2025. For existing vehicles, the new VED rates will be applied from their annual renewal date for the financial year 2025-26.
Gray mini charging in a car park

Is there road tax on electric cars over £40000?

Prior to the 2020 Budget, cars with a list price of more than £40,000, including electric cars, were subject to an “Expensive Car Supplement” for five years, beginning in the second year of registration. However, following the 2020 Budget announcement, owners of zero-emission cars, irrespective of their price, were exempted from this rule.

Year One: All electric vehicles pay a VED rate of £0 because it’s based purely on CO2 emissions.
Subsequent Years: Following the 2020 Budget, zero-emission vehicles, even those with a list price of over £40,000, remain exempt from road tax and no longer have to pay the previously applicable “Expensive Car Supplement”.

Therefore, electric cars over £40,000 do not have to pay the additional road tax that they previously had to pay due to the “Expensive Car Supplement”.

Do Hybrid cars pay road tax?

Hybrid cars in the UK do have to pay road tax. However, the amount of tax they pay depends on various factors, including the vehicle’s CO2 emissions, its list price, and when it was first registered.

Here’s a breakdown of road tax for hybrid cars:

CO2 Emissions
Hybrids typically have lower CO2 emissions compared to traditional engine cars, they often fall into a lower VED band, resulting in reduced road tax.

First Year Rate
When a vehicle is first registered, its VED for the first 12 months is calculated based on its CO2 emissions. The first-year rate is higher for cars with higher emissions.

Standard Rate
From the second year onwards, hybrid cars move to a standard rate of VED. This rate is typically lower than the first-year rate and is determined by the fuel type. Hybrid cars usually pay a slightly reduced standard rate compared to petrol and diesel vehicles. 

Expensive Car Supplement
Cars with a list price of more than £40,000 are typically subject to an “Expensive Car Supplement” for five years, beginning in the second year of registration. This applies to hybrid cars as well.

Is road tax cheaper for hybrid cars?

Road tax is typically cheaper for hybrid cars compared to conventional petrol or diesel vehicles, due to the fact that they generally have lower CO2 emissions. While hybrids pay cheaper taxes than traditional combustion vehicles, fully electric cars, producing zero emissions, usually benefit the most. Electric cars have also been exempt from standard VED charges, making their ongoing road tax generally cheaper than both hybrids and conventional vehicles.

The final word on road tax for electric cars

The current level of road tax for EVs in the UK reflects the government’s ambition to meet its climate change targets.
For many years, electric cars have enjoyed significant tax incentives.

This not only made them environmentally appealing but also financially appealing too! However, as EVs become more mainstream, adjustments in road tax are happening that will allow the government to bring in revenue. The UK government will still try to encourage EV adoption via other methods, for example, reduced BIK rates for EVs, government grants, or Ultra Low Emission Zones (ULEZ). However, from 2025, the tax benefits for EVs will align more closely with other vehicle types.

Potential EV owners will need to consider the revised road tax costs as part of their ownership costs. The long-term savings from the reduced running costs of EVs, combined with the environmental benefits of driving an EV, still make them an attractive proposition, even without the road tax incentives.


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