One of the big advantages of electric vehicles – which keep operating costs low – is that they are exempt from many taxes, including road tax.
However, that will change next year as zero-emission, low-emission vehicles will have to pay vehicle duty (also known as road tax) in the same way as internal combustion engine (ICE) vehicles.
To make sure you don’t get caught, here’s our guide for current and future EV owners: everything you need to know about road tax changes…
From April 1, 2025, zero- and low-emission vehicles will have to pay VED in the same way as vehicles with a combustion engine.
The ONS predicts that the VED will contribute to the economy every year, and with half of all new vehicles sold by 2025 expected to be electric, the government is looking to raise tax revenue to meet the targets.
Why are the VED rates changing for electric vehicles and low-emission vehicles?
The government announced changes to the VED in its spring budget in April. It was intended as a way to ensure that all motorists pay a fairer tax contribution.
Chancellor Jeremy Hunt justified the decision with forecasts from the Office for Budget Responsibility that see half of all new vehicles sold in 2025 as electric, so the change would ‘therefore create a fairer car tax system’.
According to the House of Commons Library, VED generated £7.4 billion in tax revenue for the government in 2022/2023. This is predicted to rise to £9.4 billion by 2027/2028.
When will the changes come in?
April 1, 2025
How much VED do I have to pay?
This depends on when the low-emission (hybrid and plug-in hybrid) or zero-emission car is registered.
New electric and low-emission cars registered on or after April 1, 2025:
The first year these cars pay just £10. This increases from year two to the current standard VED rate (which all other cars pay) of £190.
EVs and low-emission cars registered between April 1, 2017 and March 31, 2025:
Must pay full current VED rate of £190 from the start.
VED’s standard rate is subject to change before 2025, but no revision has taken place.
Electric and low-emission cars registered between March 1, 2001 and March 31, 2017:
Will move to the first band with a VED value (as defined by the Department for Transport) which is currently £20.
Again, this rate is subject to change before 2025, but no revision has been made.
VED band rates for cars registered on or after April 1, 2017 – now apply to EVs and low emission cars registered before March 31, 2025
How do you know if your car has low emissions?
If you don’t drive fully electric (Battery Electric or BEV), but your car has low emissions, you may not be sure which VED band your engine falls into.
The easiest way to check this is to look at the government website where the tires are declared and then check your car’s CO2 emissions.
You can do this by using the government CO2 emissions monitoring tool. You do not have to have already bought the car; you can also check new unregistered cars.
The Ford Kuga is one of the best-selling plug-in hybrids in Britain and is classified as low-emission by the government’s VED bands
0 g/km applies to all zero-emission EVs, while most plug-in hybrids (PHEVs), such as Britain’s best-selling Ford Kuga PHEV, will be in the second CO2 emissions band of 1 to 50 g/km CO2 .
For example, the 2024 Ford Kuga emits 25g/km of CO2, so a new Kuga PHEV registered on or after April 1, 2025 will only have to pay £10 for the first year.
The second tax payment thereafter will be £190 (or whatever rate is set for 2026).
Ford Kuga PHEVs registered before April 1, 2025 will be charged £190 from the first year.
What about alternatively powered vehicles (AFVs)?
Alternative fuels are defined by the government as ‘fuel or power sources that serve, at least in part, as a replacement for fossil oil sources in the energy supply of transport’.
These include hydrogen, liquid or gaseous biofuels, synthetic fuels, compressed natural gas (CNG) and liquefied petroleum gas (LPG).
They offer a cleaner (and sometimes cheaper) alternative to petrol and diesel.
Until now, AFVs have received a £10 annual discount on VED, but this will be removed from 1 April 2025.
The rate you pay for an AFV depends on when the vehicle was first registered.
Registered before April 1, 2017: This rate depends on the CO2 emissions of the vehicle (use the the same government instrument to control).
Registered on or after April 1, 2017: You pay VED’s standard rate (currently £190, but this is subject to change before 2025).
Are there changes reserved for motorcycles and vans?
From April 1, 2025, zero and low emission vans will be in the same fixed VED band as petrol and diesel vans, which currently stands at £290 per year.
Motorbikes and three-wheelers are taxed at the annual rate for the smallest motor size – currently £22 per year. You can check this on the motor vehicle tax rates page.
What other changes are taking place? The expensive car supplement
The Mercedes EQS is the flagship of the German brand and costs from more than € 112,000.
From April 1, 2025, electric vehicles are no longer exempt from the ‘Expensive Car Supplement’.
New petrol and diesel cars with a list price over £40,000 are subject to a surcharge of £355 for the first five years of registration.
From April next year, this will apply to electric and low-emission cars – you’ll have to pay the surcharge.
Will the tax rates for company cars also change?
Now that sales of private EVs are stagnating, but sales of companies and fleets are increasing sharply, tax breaks for company cars are very important.
Most companies choose electric vehicles because of the attractive Benefit-in-kind rates for these models. And the good news is that these incentives will continue beyond April 2025, and won’t be affected in the same way as VED.
BiK rates for cars emitting 75 g/km or less will increase by one percent per year from 2025-2026.
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