Vehicle Excise Duty (VED) for Electric Vehicles – What You Need to Know Post-April 2025
What is Vehicle Excise Duty (VED)?
Vehicle Excise Duty (VED), commonly referred to as road tax, is a tax collected by the UK government from vehicle owners for the use of public roads. VED rates are generally based on a vehicle’s CO₂ emissions—higher emissions mean higher taxes.
Why Were Electric Vehicles Previously Exempt?
To encourage the adoption of low-emission vehicles, the UK government initially exempted electric vehicles (EVs) from VED. This, along with other incentives, led to a surge in EV sales in recent years.
What Changed in April 2025?
From 1 April 2025, the UK government removed the VED exemption for electric vehicles. This change applies to both new and existing EVs, bringing them in line with petrol and diesel vehicles in terms of taxation.
Who Is Affected?
– New EVs registered on or after 1 April 2025
– Existing EVs first registered between 1 April 2017 and 31 March 2025
– Electric, zero or low emission cars registered between 1 March 2001 and 31 March 2017: taxed at a fixed rate of £20 annually
– Zero-emission company cars, vans, and motorcycles
How Much Will It Cost?
– First-year rate: £10 for zero-emission vehicles registered on or after 1 April 2025
– Standard annual rate (from the second year onwards): £195 (2025/26 rates)
– Expensive car supplement: An additional £425 per year (from years 2 to 6) for EVs with a list price over £40,000
– EVs registered between 1 April 2017 and 31 March 2025: already subject to the £195 standard rate and not impacted by the first-year £10 rate
Petrol and diesel vehicles with high emissions can pay up to £2,605 in the first year. Even after the changes, EVs will remain significantly cheaper to tax.
Why Was This Change Made?
- Revenue Balance: As EV adoption rises, fuel duty and VED revenues decline. Taxing EVs helps offset this.
- Fairness: EV drivers currently contribute less toward road upkeep. This aims to create a fairer system.
- Infrastructure Investment: VED revenue supports road maintenance and EV charging infrastructure expansion.
Public Reactions
EV Owners: Many feel the change is unfair, especially those expecting long-term savings.
Automotive Industry: Some see this as a potential barrier to adoption.
Environmental Groups: Some argue it may hinder the UK’s environmental targets.
Will VED Affect EV Demand?
Introducing VED could influence buyer behaviour, particularly if the benefits of EVs aren’t clearly communicated.
Other Costs to Consider with EVs
- Charging: Home charging is cost-effective; public rapid charging can be expensive.
- Insurance: Premiums may be higher due to costly components.
- Maintenance: EVs typically require less maintenance, saving on long-term costs.
Is Financial Relief Available?
According to the Treasury, while EV drivers now pay VED, their lower running costs provide financial relief. Some local councils may offer grants, free parking, or support for home chargers.
UK’s Long-Term EV Strategy
Despite VED changes, the UK remains committed to ending new petrol and diesel car sales by 2035. A wider model range and growing used EV market will support adoption.
Alternative Tax Ideas
Experts suggest replacing VED with road usage or pay-per-mile systems to ensure fairness regardless of fuel type.
Advice for EV Owners and Buyers
Current Owners: Check your car’s registration date to estimate your 2025 VED liability and plan your budget.
Future Buyers: Factor in VED, but remember long-term savings on fuel and servicing.
Key Takeaways
– EVs are now taxed but remain cheaper than petrol/diesel vehicles.
– Standard rate is £195/year, with an additional £425/year for EVs over £40,000
– EVs offer ongoing savings on fuel and maintenance.
– The UK still targets 2035 to end new petrol/diesel car sales.