Electric vehicle (EV) owners in the UK are facing significant changes to Vehicle Excise Duty (VED), commonly known as road tax, from April 2025. These adjustments mark the end of the long-standing tax exemption for zero-emission vehicles, bringing them in line with petrol and diesel cars. Understanding these new regulations is crucial for managing the total cost of EV ownership and making informed decisions about electric driving.
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Understanding vehicle Excise duty (VED)
VED is an annual fee paid by most car owners in the UK to the government. While commonly referred to as "road tax", the revenue generated is not specifically ringfenced for road maintenance. Instead, it serves as a general tax, historically structured to encourage the use of lower-emission vehicles.
Why EVs were previously exempt
Until recently, electric cars, vans, and motorcycles were fully exempt from VED due to their zero-emission status. This was a key incentive designed to boost EV adoption, meaning EV owners paid £0 in annual road tax, though they still needed to register their vehicles for tax purposes.
From 1 April 2025, electric vehicles are no longer exempt from VED and are subject to the same rates as petrol and diesel vehicles. This change was introduced to ensure all motorists contribute fairly to public funds, especially as EV numbers increase and fuel duty revenue declines.
New EVs registered from 1 April 2025
New electric cars registered from 1 April 2025 pay £10 for the first year of registration. From the second year onwards, they pay the standard annual VED rate, which is £200 for the 2026/27 tax year. This rate is significantly lower than the first-year charges for high-emission internal combustion engine vehicles.
Existing EVs registered between 2017 and 2025
Electric cars registered between 1 April 2017 and 31 March 2025 transitioned to paying the standard annual VED rate of £200 from 1 April 2025. Prior to this change, these vehicles were exempt from VED.
VED rates for older electric cars
Older electric cars, specifically those registered between 1 March 2001 and 31 March 2017, moved to the lowest VED band, paying £20 annually from 1 April 2025.
What is the expensive car supplement?
The 'expensive car supplement' is an additional VED charge that applies to vehicles with a list price exceeding a certain threshold. For non-zero-emission cars, this threshold remains at £40,000. This supplement is paid for five years, starting from the second time the vehicle is taxed.
How it affects EVs
From 1 April 2025, electric vehicles with a list price over £40,000 became subject to the expensive car supplement. However, the threshold for the expensive car supplement for zero-emission cars registered from 1 April 2025 was increased to £50,000, effective from 1 April 2026. This means EVs with a list price between £40,001 and £50,000, registered from April 2025, no longer pay the supplement when taking out a licence that comes into effect on or after 1 April 2026.
For EVs with a list price over £50,000, the supplement is £440 annually. This brings the total annual tax to £640 (£200 standard VED plus £440 supplement) for five years, starting from the second year of taxing.
What is pay-per-mile road tax?
Pay-per-mile road tax, also known as Electric VED (eVED), is a proposed mileage-based charge on electric and plug-in hybrid vehicles. It is designed to address the long-term decline in fuel duty revenue as more motorists switch to EVs.
Timeline and implications for EV owners
The UK government has confirmed plans to introduce eVED from April 2028. Under this scheme, fully electric cars will be charged 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile. This charge will be in addition to the standard VED. For a typical EV driver covering 10,000 miles a year, this could add around £300 annually in eVED. The rates are expected to increase annually with inflation from 2029.
Beyond road tax: considering all running costs
While the upcoming VED changes introduce new fixed costs for EV owners, it is important to consider the overall running costs of an electric vehicle. These include charging costs, insurance, maintenance, and other potential fees. Even with the new taxes, electric cars generally remain cheaper to run overall compared to most petrol or diesel cars.
How smart charging can help offset new taxes
The introduction of new fixed costs, such as VED, makes managing variable costs even more important. This is where smart charging and dynamic tariffs can make a significant difference. By optimising when and how you charge your electric vehicle, you can take advantage of cheaper, off-peak electricity rates. Fuse Energy's dual-rate variable tariff, combined with a smart meter and a smart charger like the Easee One, enables you to charge your EV at the most economical times. This helps to offset the impact of new taxes and maintain the financial attractiveness of electric driving. This approach gives you greater control over your energy spend, ensuring that electric vehicle ownership remains a predictable and cost-effective choice.
Managing your energy bills should be clear and easy to understand. Fuse Energy focuses on straightforward pricing, so you can see exactly what you're paying without unnecessary complexity. If you have a smart meter, you can view detailed usage data through the app or website, helping you understand how you can lower your bills. If you don't have a smart meter, Fuse Energy can upgrade your non-smart meter, completely for free. This can make it easier to track spending and make informed decisions about your energy use. Our 24/7 human support team is always on hand with fast response times of under 5 minutes whenever you need help. Click here to switch to Fuse Energy today. Find out about our mission by clicking here.
