How much will electric car tax be?

If you drive an electric vehicle (EV) in the UK, you currently don’t have to pay car tax. However, this will change from 1 April 2025, when the new 2025 Vehicle Excise Duty (VED) rules come into effect. But how much will electric car tax be? Will it depend on the type of car you drive? And how will it be calculated? 

We’re here to answer all your questions.

Do you pay road tax on electric cars?

All vehicles, including electric vehicles, need to have road tax (also known as car tax or VED) in place to drive in the UK. Road tax is a government-imposed tax that generates revenue and contributes to the costs of maintaining and improving road infrastructure.

However, while ordinary petrol and diesel cars, as well as hybrid cars, pay for this tax, the annual VED fee for electric cars is currently free. Here’s how things stand at the moment:

Zero emission vehicles (also known as battery electric vehicles or BEVs) are exempt from VED until April 2025

Plug-in hybrid electric vehicles (PHEVs) currently have to pay a reduced VED fee

Zero emission vehicles with a list price of £40,000 or more are exempt from the additional premium rate that conventional cars have to pay for five years (starting from the second time the vehicle is taxed)

Some of this payment structure will change in 2025.

Want to find out more about how to tax your car? Read our complete guide here.

How much will electric car tax be in 2025?

On 1 April 2025, zero emission electric cars will migrate from Band A VED to Band B VED, and will start paying road tax for the first time. These changes will apply to any cars registered between 1 April 2017 and 31 March 2025. 

According to the 2023 to 2024 car tax rates, Band B VED costs £10 in the first year and £180 in the years that follow. This is what zero emissions cars can expect to pay from 1 April 2025 onwards.

At this stage, PHEVs cost between £0 and £110 for the first year, depending on their CO2 emissions. This variation is because hybrid vehicles differ from one another. While some use petrol, others use diesel, and they’re all partially powered by electricity. After the first year, however, all PHEVs pay £170 every year. This structure will remain the same after 2025, unless any further government reforms come into place.

Another important change will also come into effect regarding cars that cost £40,000 or more. While electric cars of this value are currently exempt from paying car tax, this too will change in April 2025. After this date, electric cars who own a car with a list price of £40,000 or more will pay an additional £390 premium car tax, or expensive car supplement, on top of the standard rate. 

How is road tax for electric cars calculated?

Electric vehicle road tax is calculated based on three criteria (provided your car was registered after March 2001):

The CO2 tailpipe emissions of your vehicle

Its list price

The year it was registered

If your vehicle was registered before March 2001, your tax is calculated on your car’s engine size. Cars registered from 1 March 2001 to 31 March 2017 continue to be taxed at their previous, respective rates, based on their official CO2 emissions.

You can check your car’s registration date in your V5C log book, or on the DVLA’s get vehicle information service online. You’ll need your car’s registration number on hand.

What are the other costs involved in owning an electric car?

If you’re trying to plot the costs of continuing to own an EV, or perhaps you’re buying a new one at some point in the future, there are a few other costs you should keep in mind:

Charging costs: While there are some free EV charging points across the UK, most of the time, you’ll have to pay to charge your vehicle — whether you opt for a public charging point or your own power at home. The costs will depend on your vehicle type, local electricity rates, and how much you drive.

Maintenance: Generally, electric vehicles are easier and more affordable to maintain than petrol and diesel vehicles. But you should still service it as often as you would a conventional car, and keep an eye out for anything that doesn’t look or sound right. Remember that repairing or replacing specialist parts can be a little pricey.

Car insurance: Like any other motor vehicle, electric cars also need to be insured to drive on public roads. Insurance doesn’t depend on what’s fuelling the vehicle — whether that’s petrol, diesel, or electricity — but rather whether it’s using public roads. So if you’re driving it, insurance is another cost you have to keep in mind. 

Speaking of insurance, are electric cars expensive to insure?

Electric car insurance typically costs more than traditional car insurance because the technology used in electric cars is usually quite expensive itself. Insurance providers will evaluate this on a case-by-case basis, which means that there isn’t a standard cost. Instead, prices vary depending on your driving history, the make and model of the EV, and the insurance provider.

What is the future of company car tax on electric cars?

Driving an EV right now means you’re exempt from paying road tax — but that’s not the only tax benefit. 

If you drive a company car, which is classed as a “benefit in kind (BIK)” by HMRC, electric vehicles are considered much better value compared to petrol, diesel, or hybrid vehicles.

Company cars are assigned a “taxable value” based on their CO2 emissions — the higher the emissions, the higher the taxable value. It’s calculated as a percentage of the list price, ranging from 2% to 37%. Since electric cars have zero emissions, they’re only taxed 2% at present. These bands have been frozen until April 2025. 

From 2025, however, they’ll also change, and the BIK rate for electric vehicles will increase by 1% every year until 2028.

Quickfire summary: How much is road tax for electric cars?

While electric cars have to have road tax, at this stage, there is no cost involved. This will change on 1 April 2025, when all electric cars registered on or after 1 April 2027 will move from Band A VED to Band B VED.

On this date, electric cars will pay £10 for their first year of road tax, and £180 thereafter. Hybrid cars will continue to pay the fees they are currently paying. And cars with a listing price of £40,000 that are registered on or after 1 April 2025, will have to pay the expensive car supplement from which they are currently exempt. This fee only applies for five years, from the second year you pay road tax, to the sixth.

Remember that government incentives regarding EVs can be introduced, changed, or withdrawn at any time. It’s a good idea to stay up to date with the latest regulations by keeping an eye on the gov.uk website.

At Howden, we offer tailored car insurance, whether you drive a conventional, electric or hybrid vehicle. For electric and hybrid cars, we also provide charging cables, breakdown assistance, and multiple vehicle cover. Our experienced team is on hand to provide the solution that’s right for you — contact us today.

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