Decoding EV tax: a guide to electric vehicle excise duty

Owners of electric vehicles (EVs) have thus enjoyed free road tax – also known as vehicle excise duty – but that is set to change in 2025. According to the Government, equalising electric vehicle excise duty rates with those charged for petrol and diesel equivalents will ‘make our motoring tax system fairer.’

Here, we’re going to look at the changes that will affect EV owners, how much they’ll have to pay and when, and why the changes are being brought in.

Do I have to pay road tax on an electric car?

Electric vehicles will become liable for vehicle excise duty (VED) on 1 April 2025. The change was announced by Chancellor Jeremy Hunt in the 2023 Autumn Statement, giving motorists two years’ notice to factor it into their household budgets.

The change will also apply to EVs and other types of car registered between 1 April 2017 and 30 March 2025 that currently enjoy free VED.

VED is a complicated business. There are three separate regimes that encompass cars of different ages. Cars registered before March 2001 are taxed on their engine size until they turn 40 years old, at which point there’s nothing to pay. Cars registered between March 2001 and April 2017 are taxed on their CO2 emissions.

Cars registered since April 2017 pay a first-year VED rate based on their CO2 emissions when brand-new but, from the second time they’re taxed, a flat rate applies. On top of that, an extra charge is applied for five years on cars that cost more than £40,000 new.

You can find out how much VED your current car or a prospective new car is liable for by using the Parkers car tax calculator.

How much will EV road tax be in 2025?

Brand-new zero-emission vehicles – primarily EVs – registered from 1 April 2025 will be liable for a VED charge of £10 to cover them for their first year on the road. Right now, all new cars that produce CO2 emissions of less than 50g/km are exempt from first-year VED, but the rate for cars that emit 1-50g/km is also expected to rise in line with inflation on 1 April 2025. So, EVs will still pay the smallest amount of first-year road tax by some margin.

However, from the second time they’re taxed – or the car’s first birthday, if you prefer to look at it that way – EV tax rates will be equalised with those charged for every other car registered since April 2017. Currently, that rate is £165 per year, though again that may go up in the coming years.

EVs that cost more than £40,000 when new (including options) will also be liable for the so-called expensive car supplement from 2025. It’s currently £355 per year and is charged from the car’s first through sixth birthdays. Once the car reaches seven years old, its VED drops down to the standard flat rate.

The rate of VED charged for newly registered electric vans will also be equalised with that for petrol and diesel vans, which is currently £290 per year.

Additionally, as of 1 April 2025 cars registered between 1 March 2001 and 31 March 2017 which emit less than 99g/km of CO2 will also become liable for VED for the first time, charged at a rate of £20 per year.

Why will EVs have to pay for road tax?

‘To make our motoring tax system fairer, I’ve decided that electric vehicles will no longer be exempt from vehicle excise duty.’ So said Chancellor Jeremy Hunt when he announced the change to EV taxation in his 2023 Autumn Statement. Later, a tweet from the Treasury said the change would make sure ‘all motorists pay their fair share.’

The prospect of VED being introduced for EVs is controversial. Since the Government withdrew the Plug-in Car Grant free VED has been seen as the lone financial inducement remaining for private buyers – incentives exist for other types of EV buyer. VED raises billions of pounds a year for Government spending so, as we head towards the 2035 ban on the sale of new petrol and diesel cars, EVs being exempt from VED has been judged unsustainable.

RAC head of policy, Nicholas Lyes, said of the changes: ‘After many years of paying no car tax at all, it’s probably fair the Government gets owners of electric vehicles to start contributing to the upkeep of major roads from 2025.

‘While vehicle excise duty rates are unlikely to be a defining reason for vehicle choice, we believe a first-year zero-VED rate benefit should have been retained as a partial incentive. But we don’t expect this tax change to have much of an effect on dampening the demand for electric vehicles given the many other cost benefits of running one.’