Electric car tax UK: changes explained and how much EV drivers will pay

The rules around car tax on electric cars are changing from 2025. Here’s everything you need to know.

One of the many benefits of owning an electric vehicle has, for a long time, been that owners pay nothing in car tax.

Added to cheaper pence-per-mile driving costs and lower maintenance outlay, 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 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 removing the Expensive Car Supplement exemption from 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 car tax cost for an electric car?

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

New EVs registered from April 1 2025 will be liable for the lowest first-year VED rate – currently £10.

From the second year, they will move on to the standard VED rate of £180 a year. This is also how much owners of EVs registered before April 2025 will have to pay, and the same as petrol and diesel drivers.

EVs costing more than £40,000 will also be liable for the Expensive Car Supplement for the first time from April 2025. Commonly known as the luxury car tax, this adds another £390 per year to the tax bill from years two to six and will apply to any EV registered after 1 April 2025.

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.