The UK government had provided electric car owners with road tax exemption for years until April 1st 2025, when new Vehicle Excise Duty rates became effective for electric vehicles.
People who already own electric vehicles or plan to purchase one should expect these new changes to affect their financial situation. Electric vehicles have lost their tax exemption since the government implemented new Vehicle Excise Duty charges, which now subject them to the same tax requirements as petrol and diesel vehicles.
What You’ll Pay for New Electric Cars
Electric vehicles registered from April 1st 2025, will need to pay £10 as their first-year tax before moving to £195 for subsequent years. The new tax system applies to every new electric vehicle regardless of its price point and size.
The government established a temporary low £10 tax rate for the initial year to help owners transition, but owners will face the standard annual rate of £195 beginning with their second year.
The Expensive Car Problem
Electric car buyers will face substantial costs from the current tax system. Owners of brand-new electric vehicles priced at £40,000 or more will need to pay an additional £425 annually, in addition to the standard tax rate. The expensive car supplement will apply to your vehicle during the first five years of ownership, starting from the end of your first year.
The initial year tax for new electric cars priced above £40,000 costs £10 while owners must pay £620 annually for the following five years before the rate drops to £195 starting from year seven.
The expensive car supplement affects 70% of new electric vehicle buyers because most new electric cars fall into this higher price category.
What About Existing Electric Cars
The tax changes for existing electric car owners depend on when they purchased their vehicle before April 1st 2025. All electric cars registered from April 2017 to March 2025 pay the annual rate of £195 without any extra charge, even though their original price exceeded £40,000.
Existing owners will benefit from substantial savings because of this change. The road tax savings for pre-April 2025 registrations will exceed £2,000 during the first six years when compared to identical vehicles registered under the new regulations.
Electric Vans Join the Party
The new regulations extend beyond cars to include all vehicles. Owners of electric vans and light commercial vehicles will need to pay £335 per year for road tax starting from April 2025.
Company Car Benefits Still Attractive
Electric cars continue to attract company car users despite the rise in road tax costs. The 3% benefit-in-kind tax rate for electric cars after April represents a substantial advantage to users of salary sacrifice schemes, even though it increased from 2%.
Why the Change Happened
The government predicts that removing tax exemptions will have a minimal impact on electric vehicle adoption, as road tax expenses are relatively small compared to total car ownership costs. Electric cars maintain their running cost advantages, especially when home charging is available, and they keep their fuel duty exemption and city congestion charge exemptions.
The tax reform brings electric vehicles under the same taxation framework as other vehicles while ending a temporary incentive that was meant to boost early electric vehicle adoption. The government supports electric car sales growth while aiming to ban petrol and diesel cars by 2030, so they no longer need tax incentives to boost adoption.
Planning Your Purchase
The timing of your electric car purchase has become essential for anyone who wants to buy an electric vehicle. The tax implications of the March and April 2025 registration will result in substantial additional tax expenses for vehicles throughout their lifespan, especially for high-end models.
Electric cars no longer receive complete tax exemptions under the new system, yet they maintain various financial benefits which appeal to numerous drivers.
Understanding these costs at the beginning allows you to determine if an electric car suits your financial situation and driving requirements.
