Jack Cameron
13 January 2025
As confirmed by the government, electric vehicles (EVs) will no longer be exempt from Vehicle Excise Duty (VED), commonly known as road tax, from 2025. EVs registered on or after 1 April 2025 will incur a first-year VED rate of £10, followed by the standard annual rate of £195 from the second year onwards.
Existing EV owners will also face charges, unfortunately. Vehicles registered between 1 April 2017 and 3 March 2025 will pay the standard annual rate (£195) from their next tax renewal after April 2025. Older EVs registered between March 2001 and March 2017 will move into Band B, requiring an annual VED payment of £20.
Additionally, the ‘Expensive Car Supplement’ (ECS) will now apply to EVs priced over £40,000, removing their previous exemption. This means an extra £355 per year for the first five years. Data from the online marketplace Auto Trader indicates that around two-thirds of new EVs exceed the £40,000 threshold, subjecting them to the ECS.
Changes will also impact hybrids and higher-emission vehicles. From 1 April 2025, hybrids with CO2 emissions between 1-50g/km will see their first-year VED rise to £110 (from £10), while those emitting 51-75g/km will increase to £130 (from £30). Vehicles emitting more than 75g/km will see steep increases, with a car emitting 151-170g/km now paying £1,360 in first-year VED, up from £680. First-year VED costs for all emissions bands above 76g/km will double.
The shift in tax policy comes as the government seeks to offset declining revenues from petrol and diesel vehicle taxes, including fuel duty, which generates 53p per litre sold compared to the lower tax rate on domestic electricity. However, the government asserts these changes are not designed to increase revenue. As Chancellor of the Exchequer Rachel Reeves stated in October, “Increasing Vehicle Excise Duty rates by Retail Price Index in 2025 to 2026 will ensure that Vehicle Excise Duty receipts are maintained in real terms.”
Despite these increases, EVs remain significantly more cost-effective than petrol or diesel vehicles, particularly for company car users benefiting from a Salary Sacrifice Scheme or a Partners’ Car Scheme, so don’t worry too much if you’re enrolled in such a scheme.
If you’re in the market for an EV, Pike+Bambridge recommend you register the vehicle by the 31st of March 2025 to avoid the imminent increase for this year.
