Electric vehicle tax

Registered keepers of electric, zero or low emission cars, vans and motorcycles have paid vehicle excise duty (tax) since 1 April, 2025. But what changes have been made since this introduction?

We'll talk through the latest advancements but first here's all you need to know about tax rates for electric vehicles currently on the market.

Electric, zero or low emission cars registered on or after 1 April, 2025

If you own one of these vehicles, you will need to pay the lowest first year rate of vehicle tax at £10 from 1 April, 2025. From the second tax payment onwards, you will pay the standard rate of £195 per year.

Electric, zero or low emission cars registered between 1 April 2017 and 31 March 2025

Owners of these vehicles will pay the standard annual rate of £195.

Electric, zero or low emission cars registered between 1 March 2001 and 31 March 2017

These vehicles will move to the first band that has a VED value. This will be £20.

Hybrid and alternatively fuelled vehicles (AFVs)

The £10 annual discount for hybrid and AFVs will be removed, and the rate will depend on when the vehicle was first registered. If the vehicle was:

• Registered before 1 April 2017 – this rate will depend on the vehicle’s CO2 emissions (check the current rates for these vehicles).
• Registered on or after 1 April 2017 – this will be the standard rate (£195).

Electric vans

Most electric vans will move to the standard annual rate for light goods vehicles. Check the current rates for these vehicles.

Electric motorcycles

Electric motorcycles and tricycles will move to the annual rate for the smallest engine size. Check the current rates for these vehicles.

Why did the electric car tax coming in?

The government stated in the 2024 Autumn Budget that these changes are being brought in to “increase the incentives towards new zero-emission cars at the point of purchase, and support take-up of new electric vehicles, which is crucial to achieving Net Zero. Revenue from this change will also help support public services and infrastructure across the UK.”

The government plans to use the EV tax to recoup a potential £35 billion tax black hole.

The government has also announced a longer-term pay-per-mile plan that has been developed to replace the lost revenue from fuel duty.

Due to start in April, 2028, this eVED will find EV drivers paying approximately 3p per mile and plug-in hybrid drivers paying 1.5 p per mile. Details on how mileage is tracked are still to be confirmed.

What is the luxury EV car tax threshold?

From 1 April, 2026, the Expensive Car Supplement (or Luxury Car Tax) will applies to electric vehicles worth £50,000 instead of £40,000. This change will be applied retrospectively to EVs registered on or after 1 April, 2025, meaning drivers who bought an EV for over £40,000 in 2025 will potentially be exempt from paying the extra £440 per year.

What are the benefits of an electric vehicle?

Electric vehicles are becoming more popular around the world, with the International Energy Agency stating that nearly 14 million electric cars were sold globally in 2023. There are a number of benefits when it comes to driving an EV.

Environmental benefits

• Zero emissions – Electric vehicles don’t contribute to air pollution.
• Sustainable charging – Some EVs can be charged via renewable energy sources like solar or wind power.

Economic benefits

• No fuel costs – Electricity is generally cheaper than petrol or diesel.
• Reduced maintenance – There are less moving parts in an EV, meaning less maintenance.

Are there any incentives for driving an EV?

There are a number of electric vehicle (EV) incentives including grants for charging points, workplace charging schemes and electric car sacrifice schemes.

Company car users have been enjoying a Benefit-in-Kind taxation of just 2% but this will also rise to 3% from April. This rate is still lower than cars with higher CO2 ratings

In 2022, the government announced a £20 million pilot scheme designed to improve access to electric vehicle charging points in the following areas:

• Barnet
• Dorset
• Durham
• Kent
• Midlands Connect (with Lincolnshire as a lead authority)
• North Yorkshire
• Nottinghamshire
• Suffolk
• Warrington

This scheme will help create new EV infrastructure, including petrol station-style charging hubs. It is also now a legal requirement for all new-build houses and supermarkets to have charging points.

Sources

https://www.gov.uk/guidance/vehicle-tax-for-electric-and-low-emissions-vehicles

https://www.gov.uk/government/publications/vehicle-excise-duty-first-year-rates-for-cars-from-1-april-2025/first-year-vehicle-excise-duty-rates-for-cars-from-1-april-2025

https://www.rac.co.uk/drive/electric-cars/running/electric-car-road-tax-guide-do-i-need-to-pay/

https://www.confused.com/compare-car-insurance/electric/ev-tax-introduced

https://www.autoexpress.co.uk/tips-advice/electric-car-tax-explained

https://www.homebuilding.co.uk/news/electric-car-charging-points-law