How Much Will Electric Car Tax Be in 2025?
As the UK pivots towards electric vehicles (EVs) to support sustainable transport, government tax policies are evolving to include EV owners. In the upcoming changes effective from April 2025, EV owners will need to pay Vehicle Excise Duty (VED), also known as road tax. Here’s a breakdown of what this means for EV owners in 2025 and beyond.
New EV Tax Policy: What Changes Are Coming?
The UK government has confirmed that starting from 1 April 2025, all newly registered EVs will no longer be exempt from VED. Previously, the zero-emission nature of EVs granted them a tax-free status, aligning with the government’s green initiatives. However, as EV adoption has grown, the government is shifting gears to incorporate EVs into the regular VED system.
First-Year Tax Rate for New EVs
From 1 April 2025, any electric car registered on or after this date will be subject to a modest first-year tax rate of £10. This fee will apply until the 2029-30 tax year, ensuring that EV owners contribute towards road upkeep, albeit at a lower rate than their petrol and diesel counterparts. This minimal rate reflects the government’s ongoing commitment to incentivise EV ownership while maintaining infrastructure.
How Does This Compare with Petrol and Diesel Vehicles?
To understand how EV taxes will be positioned, it’s useful to compare them with the changes for combustion-engine vehicles. From next year, traditional petrol and diesel cars will face increased first-year tax rates based on their CO emissions. Vehicles emitting between 1-50g/km of CO will pay £110 for the first year, a significant jump from the previous rate. Cars with emissions above 76g/km will see their first-year rates doubling, reflecting a clear government push for greener choices.
Ongoing Costs: What Happens After the First Year?
While the initial first-year rate for EVs has been set, the government has not yet finalised the standard annual rate for subsequent years. For now, it’s expected that the rate will remain competitively low, encouraging the transition to electric. However, further details are anticipated closer to 2025 as the government fine-tunes its strategy to balance environmental goals with fiscal responsibilities.
The Expensive Car Supplement for EVs
A notable change under the new policy is an update to the Expensive Car Supplement threshold, which affects cars priced above a certain level. Previously, EVs valued over £40,000 would have been subject to an additional £410 per year in tax, applied between the vehicle’s first and sixth birthdays. After this period, the rate would reduce to a standard flat rate.
However, recognising that many EVs are priced above the £40,000 mark, the government plans to revise this threshold for electric cars specifically. This measure acknowledges the current premium cost of zero-emission vehicles and aims to prevent excessive charges on eco-friendly choices. While the exact revised threshold hasn’t been disclosed, it’s expected to lessen the burden on EV owners and maintain a balance between affordability and contribution.
Why Is the UK Introducing EV Road Tax Now?
The introduction of VED for EVs is part of a broader governmental shift towards a balanced motoring tax system. The decision to include EVs in VED was initiated in former Chancellor Jeremy Hunt’s 2023 Autumn Statement and subsequently adopted by the Labour government. A statement from the Treasury highlighted the need for “all motorists to pay their fair share,” ensuring that EV owners contribute to the country’s infrastructure needs alongside traditional vehicle owners.
While this adjustment may seem disappointing to EV owners who have benefited from tax exemptions, it’s worth noting that VED remains substantially lower for EVs compared to conventional vehicles, sustaining a key incentive for eco-conscious buyers.
Industry Response to EV Taxation
Introducing VED for EVs has sparked mixed reactions within the automotive industry. With the government previously ending the Plug-in Car Grant, which provided subsidies for electric car purchases, the road tax exemption was one of the last financial advantages for private EV buyers. Now, with VED applying to electric cars, some argue it could hinder the momentum of the EV transition. However, industry experts agree that the measure is necessary for long-term sustainability, ensuring that all vehicle types contribute proportionately.
What Does This Mean for Potential EV Buyers?
For those considering an EV purchase, the 2025 VED policy offers insights into future ownership costs. While the first-year rate remains modest at £10, buyers should prepare for potential changes in standard rates as the government continues to monitor and adjust its tax policies for EVs. If purchasing a premium EV, it’s also important to consider the Expensive Car Supplement and keep an eye on upcoming updates to this threshold.
In terms of financial planning, these tax adjustments make EV ownership more predictable and place EVs within a more conventional tax structure, facilitating informed decision-making for potential buyers. For those on a budget, EVs will continue to be a low-cost choice compared to combustion-engine vehicles, especially as fuel prices remain volatile.
The upcoming VED changes mark a significant turning point for EV taxation in the UK. While this shift might feel unexpected for current and future EV owners, the government’s approach still maintains considerable advantages for EVs. As more details on ongoing rates and the Expensive Car Supplement threshold emerge, the industry anticipates a balanced tax structure that sustains EV momentum without burdening new adopters.
From 2025, it’s clear that the road tax system is evolving, promoting a shared responsibility for road use and environmental progress. For potential EV buyers, this means planning for the modest first-year fee and staying informed on additional developments as the government outlines its path to a sustainable motoring future.
Header image credit: Hyundai Motor Group (Unsplash)
