Background
Currently owners of electric vehicles benefit from a road tax exemption. This means there is no charge for motorists when taxing their electric vehicles.
From April 2025 this exemption will be ending and electric vehicle (EV) owners will be charged up to £620 in road tax going forward. This change was originally announced in the Budget in 2022 under the then Conservative chancellor Jeremy Hunt. A recent survey by used car retailer Motorpoint found that 83% of EV owners were unaware that they are likely to have to pay more vehicle excise duty (VED) tax from April 2025.
The good news for EV owners is that it is possible to renew their road tax early in order to save at least some of this increase over the next 12 months.
Detail
From 1 April 2025, registered keepers of electric, zero or low emission cars, vans and motorcycles will need to pay vehicle tax for the first time, in the same way as registered keepers of petrol and diesel vehicles. This change will apply to both new and existing vehicles.
This new measure removes band A under the existing VED system which is currently £nil. Vehicles in this band will be required to move to the first band where a rate becomes payable.
The changes to EV road tax from 1 April 2025 are as follows:
- Electric, zero or low emission cars registered on or after 1 April 2025: New electric cars will be charged the lowest rate of VED, currently £10, for the first year. For vehicles priced under £40,000 this will increase in the second year of registration to the standard rate of VED, currently £195.
- Electric, zero or low emission cars registered between 1 April 2017 and 31 March 2025: These vehicles will pay the standard rate of £195.
- Electric, zero or low emission cars registered between 1 March 2001 and 31 March 2017: These vehicles will move from the current Band A to the Band B rate, currently £20 a year.
- Expensive car supplement: The exemption from the expensive car supplement will end on 1 April 2025. New electric and zero emission vehicles registered on or after 1 April 2025 with the list price exceeding £40,000 will attract the standard rate, plus the expensive car supplement for the first 5 years from the start of the second licence year. The supplement will be £425 a year from 1 April 2025, meaning EV owners with an ‘expensive car’ will pay £620 per year for road tax from the second year of ownership.
- Hybrid and alternatively fuelled vehicles (AFVs): The £10 annual discount will be removed and the rate of tax payable will depend on when the vehicle was first registered. If registered before 1 April 2017, the rate will depend on the vehicle’s Co2 emissions (check the current rates for these vehicles). For vehicles registered on or after 1 April 2017 the standard rate will apply, which is currently £195.
- Electric or zero emission vans: Most electric vans will move to the standard rate for petrol and diesel light goods vehicles, currently £335 per year.
- Electric or zero emissions motorcycles and tricycles: These vehicles will move to the annual rate for the smallest engine size, currently £25 per year.
There is however the possibility for EV owners to save some tax over the next 12 months and avoid at least some of this first year increase, potentially saving up to £195. Many motorists might not realise that they can re-tax their car at any time. This means that an EV owner whose renewal is due in April 2025 could effectively extend their road tax exemption by 11 months if they were to re-tax their vehicle in March 2025 ahead of the rules changing. The effect of this quirk in the system would be to delay the tax payment until March 2026 when it would need renewing again. It should be kept in mind that when re-taxing your car, an owner is charged from the start of the month, so there is no benefit in waiting until the end of March.
If you would like further information on changes to road tax for electric vehicles, or on any of the points raised above, please contact our Tax Director, Jenny Marks.
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