Electric car road tax – the complete guide

Published: 5 December 2023

Right now, if you drive an electric car, you don’t have to pay Vehicle Excise Duty, better known as car tax or road tax. But from 2025, that’s changing.

In this guide we’ll tell you everything you need to know about tax for electric cars, both now and in the future.

The amount of Vehicle Excise Duty (we’ll call it ‘car tax’ from here on) you pay depends on the amount of carbon dioxide (CO2) your car emits. Because the system is intended to persuade people to opt for less-polluting cars,  the more pollution your petrol or diesel car produces, the more you have to pay.

At the moment, you don’t need to pay car tax for an electric car. They don’t emit any CO2 while driving so have a zero car tax rating, although you still need to to fill out the official paperwork each year, even though it won’t cost you anything.

The rules, however, are set to change on the first of April 2025, when electric cars will be subject to car tax for the first time. For the first year, you’ll pay the lowest rate of tax at £10, but from the second year you’ll need to pay the same flat rate as petrol and diesel cars (currently £180). Used electric cars registered between April 2017 and the end of March 2025 will also have to pay the flat rate.

Electric cars are currently exempt from the car tax surcharge on cars worth more than £40,000 when new, but that will also change in April 2025 when owners of EVs that cost more than £40,000 when new will be required to pay the surcharge (now  £390 a year for five years).

New cars are taxed according to their CO2 emissions for the first year, with the tax on zero-emission cars costing nothing, and the most polluting cars (emitting more than 255g of CO2 per kilometre) costing £2,605. However, that first year’s tax is usually included in the on-the-road price of the vehicle.

After that, it currently costs a flat rate of £180 per year to tax a petrol or diesel car, assuming it was registered after April 2017, and the car tax surcharge for cars costing more than £40,000 when new is £390 a year for five five years after registration.

Older cars are subject to different rates depending on their CO2 emissions. A system of bands is used, with the least-emitting cars sitting in Band A and paying nothing and the most-polluting sitting in Band M and owing annual car tax of £695.

Yes. You still have to pay car tax for hybrid cars. The fees are  the same as for regular petrol and diesel cars (both pre- and post-April 2017), but the amount is lowered by £10 per year if you have an alternative-fuel car, which includes mild, full and plug-in hybrids.

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Technically, electric cars are not exempt from Vehicle Excise Duty. They still have to be taxed, it’s just that right now it doesn’t cost anything. But, practically, you don’t have to pay anything for car tax on an electric car. Until 2025, anyway.

If you’re a company car driver, the Benefit-in-Kind tax is much lower on electric cars than regular petrol, diesel or hybrid cars. The BIK rate on electric cars is just 2% until the financial year 2025/2026, when it starts rising by 1% per year. By comparison, even the cleanest petrol, diesel and full-hybrid cars are taxed at 25% or more.

There are also advantages if you run your own business and use company electric cars, because you’re entitled to 100% first year capital allowances. That means you can deduct the whole expenditure for your cars from your pre-tax profits.

Electric car drivers will start paying car tax from 1 April 2025, when the new Vehicle Excise Duty rules come into force.

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