Road Tax Changes for Electric Cars
Whether you’re the proud owner of an electric vehicle, or you’re considering getting one, you might want to brace yourself for some upcoming tax changes. From 2025, electric car owners will no longer be exempt from paying road tax. That's right, folks. The government has decided that electric cars need to contribute to the upkeep of the roads, just like any other vehicle.
Now, before you start revving your EV engine in frustration, let's get down to the nitty-gritty details of what these road tax changes mean for electric car owners. If you're asking yourself, "What is road tax for electric cars?" or "Do electric cars pay road tax?" don't worry, we've got you covered.
In this blog, we'll provide all the information you need to know about the new regulations, including how much you can expect to pay and how to stay compliant.
Do electric car drivers pay road tax?
Electric car owners have been enjoying the sweet, sweet freedom of not having to pay any road tax charges. These super cool and eco-friendly cars produce zero CO2 emissions, making them exempt from current taxation laws.
This amazing perk has been a major selling point for those who have decided to switch over to driving an EV, and it's not hard to see why. Who wouldn't want to save some serious cash while doing their part to save the planet?
However, like all good things, this unique benefit is about to come to an end. Chancellor Jeremy Hunt announced in November 2022 that all electric vehicle drivers will need to start paying road tax as of 2025.
The changes come as the government moves towards banning petrol and diesel vehicles by 2030. With electric cars taking over the road, there would be a huge drop in the amount of tax the government receive from drivers if new measures weren’t introduced.
How will road tax for electric cars change?
There are a couple of road tax changes being introduced from 2025 that impact EV drivers. The first is that Zero-emission cars registered on or after April 1, 2017, will be subject to the lowest first-year rate of Vehicle Excise Duty (VED). This currently applies to vehicles with CO2 emissions between 1 and 50g/km. From the second year of registration onwards, they will move to the standard annual rate.
From April 1, 2025, the Expensive Car Supplement exemption for electric vehicles will also end. New zero-emission cars registered after this date will be subject to the expensive car supplement if eligible. This currently applies to those with a list price of, or exceeding, £40,000.
The removal of Band A under the graduated VED system means that cars registered after March 1, 2001, and before April 1, 2017, with CO2 emissions will no longer be exempt from VED. These vehicles will need to move to the first band where a rate becomes payable - Band B in this case.
Electric vans are also expected to see changes introduced. Most zero-emission vans will move to the standard annual rate for petrol and diesel light goods vehicles, while zero-emission motorcycles and tricycles will move to the annual rate for the smallest engine size.
How much will road tax cost for electric vehicles?
Starting from April 1, 2025, newly registered electric vehicles will be subject to a first-year road tax payment equivalent to "Band B" petrol cars, which is currently set at £10. Once this initial payment is made, owners will need to renew their road tax either annually or biannually and pay the standard rate of £165. They will also need to pay the expensive car supplement if applicable.
If you own a low-emission or zero-emission car registered between April 1, 2001, and March 30, 2017, then you're in luck! You'll only have to pay a road tax of £20 per year. However, keep in mind that by the time the new changes take place, these cars will be at least eight years old.
The government has also announced plans to "equalise" rates for alternative fuel vehicles and hybrids, although they have yet to provide details on the charges involved.
For zero-emission vans, they will soon be subject to the same rate as petrol and diesel light goods vehicles, which is currently set at £290 per year. This road tax policy change reflects the government's efforts to prepare for the 2030 switchover to low-emission vehicles.
How is road tax calculated?
If you're wondering how road tax is calculated for your car, the answer varies depending on its age. For cars registered after March 2001, the amount of VED you pay is based on the CO2 tailpipe emissions. For cars registered before March 2001, the engine size determines the VED.
Currently, battery electric cars are exempt from road tax due to their zero emissions and lack of an engine. However, if your car has particularly low CO2 emissions, you may be charged a reduced first-year rate. But keep in mind that this rate increases from year two onwards.
However, the changes being implemented from March 1, 2025, mean the first band at £0 will be dissolved, and all zero-emissions cars will be subject to at least "Band B" levels of road tax.
So, if you want to the enjoy the tax-free benefits of driving an EV, you might want to buy one now before these changes kick in. We have an excellent guide to buying an EV you can check out before you buy.