Charges up for charging up: Electric to Pay Vehicle Tax from April 2025

Starting from 1 April 2025, a significant change is on the horizon for owners of electric and low-emission vehicles. At present, electric vehicles (EVs) are exempt from vehicle tax, a major incentive for buyers considering an electric model for their next car purchase.

As initially announced in the 2022 autumn budget, the period of tax exemption for electric vehicle owners is drawing to a close. Starting from April 1st, 2025, owners of electric cars, vans, and motorcycles will be subject to vehicle excise duty (VED) just like owners of petrol and diesel vehicles.

The cessation of the tax-free period for zero-emission vehicles will affect both new and existing vehicles. Presently, vehicles in Band A which encompasses most electric and low-emission vehicles, are not required to pay VED. However, in 2025, Band A will be eliminated, and these vehicles will transition to a new band where taxes will be applicable depending on when they were registered (more on that below). 

The price of the future: EVs to lose expensive car supplement exemption

Unfortunately, this isn't the only change coming for EV owners as the expensive car supplement (for cars over £40,000 new) will also apply to electric vehicles registered on or after 1st April 2025. This is bad news for those looking to save with an EV as the current cost of this is £410 for the first 5 years . Along with the standard rate tax of £190 payable from the second year of registration, new EV owners could be paying up to £600 a year in VED in todays money. 

If the government want more people to seriously consider EVS as a viable form of transport they will certainly need to address the expensive car supplement threshold that was first set in 2017. When you consider that the average UK price for a brand new EV is £54,324, there will be plenty of people paying £600 a year to drive an everyday car.  interestingly, the £40,000 threshold that hasn't moved since 2017 is now the equivalent of £51,956 in todays money, a much more appropriate threshold that would make EV ownership more affordable for the average person.  

Here’s a breakdown of how this will impact different EVs:

Depending on what you drive and when it was registered, you will have a different amount of VED to pay on your low emissions vehicle. Check out our breakdown below to see where you stand with your next new or used vehicle.

1. For Electric and Low Emission cars  registered on or After 1 April 2025

• First-year tax: You’ll pay the lowest first-year rate of vehicle tax (currently £10 in 2024), which currently applies to vehicles with CO2 emissions between 1-50g/km.
• From the second year onwards: Expect to pay the standard rate, which is £190 for 2024 but may increase in 2025.

2.  For Electric and Low Emission Cars Registered Between 1 April 2017 and 31 March 2025

• These vehicles will automatically move to the standard rate - currently set at £190 for 2024, but this rate could change in 2025.

3. For Electric and Low Emission Cars Registered Between 1 March 2001 and 31 March 2017

• These cars will be moved from Band A to Band B, which is currently £20 for 2024. This rate is also subject to change for 2025.

4. Hybrid and Alternatively Fuelled Vehicles (AFVs)

• The current £10 annual discount for hybrid and AFVs will be removed.
• How much you’ll pay depends on when the vehicle was first registered:
  • Before 1 April 2017: The rate will depend on the car’s CO2 emissions.
  • On or after 1 April 2017: You’ll pay the standard rate, which is £190 for 2024.

5. Electric Vans

• Most electric vans will now be subject to the standard annual rate for light goods vehicles paid by petrol and diesel machines. This means that EV van owners can expect to pay an extra £335 a year in VED than they had done previously.

6. Electric Motorcycles and Tricycles

• Electric motorcycles and tricycles will now move to the annual rate for the smallest engine size. This is currently just £25 a year which isn't too bad on balance. 

7. Additional Rate for Expensive Electric Cars

• As mentioned earlier, If you own a new electric car registered on or after 1 April 2025 with a list price exceeding £40,000, you will need to pay the expensive car supplement starting from the second tax payment onwards. This is currently £410 a year and lasts for 5 years. Our advice would be to look for a new car that's been registered before this date if possible to avoid an extra £2,000 over 5 years of ownership. if you're looking for a used electric car, we can help!

The zero rate tax band has been a huge draw in the direction of electric vehicles when buyers are deciding on what car to buy next. With this upcoming change it will be interesting to see how the electric car market (both new and used) reacts to the news. Will we see a drop in the demand of electric vehicles as their benefits start to dwindle or will buyers be largely unbothered having already been paying VED for so long anyway?

words by Dave Tappenden