New electric car tax 2025: UK road tax changes explained and how much EV drivers will pay

The recent Budget included new information on how electric cars will be taxed from April 2025. Here’s everything you need to know.

Electric car tax has become a hot topic recently after Chancellor Rachel Reeves included new details in her autumn Budget, including long-term indications of how much drivers will pay.

For years, being exempt from car tax has been one of the many benefits of owning an electric car.

Added to cheaper pence-per-mile driving costs and lower maintenance and repair bills, being tax-free helps save EV owners significant amounts of money every year.

But that is set to change from next year, bringing additional bills for every EV driver and potentially adding hundreds of pounds to the cost of running an electric car.

Officially known as vehicle excise duty (VED) and often wrongly as ‘road tax’, car tax is an annual levy on drivers of most petrol, diesel and LPG cars. Costs vary depending on the age of the car, its CO2 emissions, fuel type and even original purchase price but until now the charges haven’t applied to electric cars.

What is changing?

From 1 April 2025 EV drivers will have to pay the same annual car VED as every other driver.

Electric cars already need to be taxed every year but the cost of that is currently £0 as they sit in Band A of the VED system.

From April 1, 2025, Band A is being scrapped and all EVs will be liable for tax. At the same time, the government is scrapping the £10-per-year discount for hybrid vehicles and changing the Expensive Car Supplement exemption on EVs.

It is also changing the rules on electric vans and motorcycles. From April 2025, most zero emission vans will move to the standard annual rate for petrol and diesel light goods vehicles, currently £290.

Zero emission motorcycles and tricycles will move to the annual rate for the smallest engine size – £22.

How much will electric car tax cost?

The cost of electric car tax will vary depending on the age and purchase price of the vehicle.

New EVs registered from 1 April 2025 will be liable for the lowest first-year VED rate – currently £10. The recent Budget confirmed that that cost would remain the same until at least the 2029-30 financial year.

From the second year, electric cars will move on to the standard VED rate, which is currently £190 a year. This is also how much owners of EVs registered between 1 April 2017 and 31 March 2025  will have to pay, and the same as petrol and diesel drivers. For zero-emission cars registered before April 2017, annual VED will be £20.

How electric cars will be affected by the Expensive Car Supplement is still not clear. Under the original plans from the 2022 Budget, all new EVs costing more than £40,000 and registered from 1 April 2025 were due to be liable for the ‘luxury car tax’ from April 2025. This would add another £390 per year to the tax bill from years two to six.

However, in the Budget, the government acknowledged the ‘disproportionate impact’ this would have on EVs, and said it would consider raising the threshold at a ‘future fiscal event’.

How do I tax my electric car?

The way you tax an EV won’t change. As before, you can do it online via the official DVLA website, over the phone or by post. The only difference is that from 1 April, 2025, there will be a cost attached, rather than the wallet-friendly £0 rate you’ve paid until now.

Does this only affect new electric cars?

Sadly not. Unlike some tax changes, next year’s new rules will apply to all electric cars, vans and bikes including those already on the road.

Why are EVs being charged car tax?

The simple reason is that the more people switch to EVs, the more money the government loses.

As well as VED, fossil fuel vehicles bring in money in the form of fuel duty – currently 52.95p on every litre. It is estimated that in coming years, the reduction in income from this and VED will cost the Treasury £35 billion per year.

So it needs to plug that gap and imposing tax on zero-emissions vehicles is a quick and simple way to make a start. The Treasury estimates that in 2025-26 alone, it will bring in an additional £515 million and by 2027-28 will be worth £1.5bn.

When it announced the plan the Treasury said that removing the VED exemption “will marginally reduce the incentive to switch to electric vehicles, but the impact should be minimal given the marginal cost of VED compared to the overall cost of a vehicle”.

It also said that it would maintain incentives such as low company car tax rates.

Benefit in Kind tax on EVs is currently 2% and is set to rise by 1% per year from 2025 to 2028. In comparison, the lowest BiK on a petrol or diesel car is 15%, rising to 18% in 2028, making EVs particularly attractive to company car drivers.