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'Road tax for EVs' among big VED changes coming in 2025
Here's everything you need to know about tax changes coming in 2025 for electric cars, hybrids and petrol/diesel vehicles
Words by: Mark Nichol
Published on 31 December 2024 | 0 min read
Electric vehicles will no longer be exempt from VED (road tax) from 2025, the Government has confirmed. Cars registered on or after April 1 2025 will pay a first-year rate of £10, then the standard annual rate of £195 from the second year thereafter.
Those who already own an electric vehicle will be hit with a charge, too. EVs registered between April 1 2017 and March 3 2025 will also pay the standard yearly rate (£195), starting from their next tax renewal after April 2025. Older electric cars (those registered between March 2001 and March 2017) will move into Band B, meaning they pay £20 per year in VED. In addition, the ‘Expensive Car Supplement’ (ECS) will now apply to EVs priced over £40,000, where previously they were exempt. That means an additional £425 per year for the first five years. Auto Trader data shows that around two-thirds of EVs cost more than £40,000 new, and will therefore be hit with the ECS. Alongside VED changes for EVs, hybrids will see first-year rates increase substantially. Cars with CO2 emissions between 1-50g/km will see their first-year VED increase to £110 (from £10), and those between 51-75g/km will increase to £130 (from £30). Cars that emit more CO2 than 75g/km will also see huge first-year jumps from 1 April 2025. A car emitting 151-170g/km of CO2, for instance, will now attract £1,360 in first-year VED. It was previously £680. In fact, the first-year cost of every band above 76g/km has doubled. This is happening because the Government is losing tax revenue every time a driver switches from a petrol or diesel vehicle to an electric one, not just from vehicle tax but from fuel duty too; the treasury currently takes 53p from every litre of petrol or diesel sold, whereas tax on domestic electricity is much lower. The Government claims that the changes won’t actually bring any additional income into the treasury. "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,” said Chancellor of the Exchequer Rachel Reeves in October. Despite these tax hikes, running an electric vehicle remains much more cost-effective than running an equivalent petrol or diesel model, generally - especially if it's a company car on a salary sacrifice scheme. For more on tax and rule changes coming for drivers in 2025, click here.
Those who already own an electric vehicle will be hit with a charge, too. EVs registered between April 1 2017 and March 3 2025 will also pay the standard yearly rate (£195), starting from their next tax renewal after April 2025. Older electric cars (those registered between March 2001 and March 2017) will move into Band B, meaning they pay £20 per year in VED. In addition, the ‘Expensive Car Supplement’ (ECS) will now apply to EVs priced over £40,000, where previously they were exempt. That means an additional £425 per year for the first five years. Auto Trader data shows that around two-thirds of EVs cost more than £40,000 new, and will therefore be hit with the ECS. Alongside VED changes for EVs, hybrids will see first-year rates increase substantially. Cars with CO2 emissions between 1-50g/km will see their first-year VED increase to £110 (from £10), and those between 51-75g/km will increase to £130 (from £30). Cars that emit more CO2 than 75g/km will also see huge first-year jumps from 1 April 2025. A car emitting 151-170g/km of CO2, for instance, will now attract £1,360 in first-year VED. It was previously £680. In fact, the first-year cost of every band above 76g/km has doubled. This is happening because the Government is losing tax revenue every time a driver switches from a petrol or diesel vehicle to an electric one, not just from vehicle tax but from fuel duty too; the treasury currently takes 53p from every litre of petrol or diesel sold, whereas tax on domestic electricity is much lower. The Government claims that the changes won’t actually bring any additional income into the treasury. "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,” said Chancellor of the Exchequer Rachel Reeves in October. Despite these tax hikes, running an electric vehicle remains much more cost-effective than running an equivalent petrol or diesel model, generally - especially if it's a company car on a salary sacrifice scheme. For more on tax and rule changes coming for drivers in 2025, click here.