Electric Car Tax: Your 2026 Guide
As of April 2025, electric cars in the UK are no longer be exempt from Vehicle Excise Duty (VED).
If you already own or are thinking about buying an electric vehicle, these new tax rules alter the view a touch.
Read on to understand how the new tax rules affect current and prospective EV owners.
How Does Electric Car Tax Currently Work
Back in 2024, EVs have a £0 annual tax rate.
This was down to electric vehicles benefiting from VED exemption. Without annual road tax payments, the government hoped for an uptick in EV ownership from eco-conscious and cost-effective drivers.
But starting April 2025, that exemption ended.
So, what changed in 2025?
Under the updated VED system, the tax-free status of electric vehicles ended in April 2025.
These changes applied to both new and existing electric vehicles, as well as hybrids.
Owners were treated to a lower first-year rate of £10. From then on, electric cars will be subject to the standard rate for diesel and petrol vehicles of £190 per year.
The change aims to balance the growing popularity of electric cars against a shortfall in road tax revenue. The government’s commitment to promoting electric vehicle adoption is evident by their first-year bonus period of £10.
Ultimately, however, this shift in tax policy will hit new and existing EV driver’s wallets. We could see people drawn away from electric cars due to higher ownership costs, especially if the government pushes back their zero emission pledge by 2035.
How Much Will Electric Car Tax Be from April 2025?
Here’s how electric car taxes will shape up from 2025 and onwards.
First-Year Rate: £10 (From 1 April 2025)
All new EVs registered from April 2025 were taxed at the first-year rate of £10.
This is the lowest tax rate for any vehicle and applies to all new EVs, regardless of make or model.
The aim is to keep EVs attractive to buyers in the first year of ownership, even as the overall tax system changes.
Standard Rate: £195 (From 1 April 2026 and Onwards)
From the second year onwards, most EVs will pay a standard rate of £195 annually, aligning them with petrol and diesel vehicles.
Luxury Car Supplement: £410 (From 1 April 2025)
One exception will be for EVs priced above £40,000. These luxury cars face an additional £410 annual fee for five years, starting from the second year.
Example 2025 Tax Scenario: Luxury EV vs Standard EV
- A BMW iX1 (starting at £52,255) would incur a £195 standard rate plus a £410 luxury supplement, totaling £605 per year for five years.
- A Mini Electric (starting at £30,000) would only pay the £195 standard rate.
BMW iX1 (Starting Price: £52,255)
| Year | First-Year Rate (£) | Standard Rate (£) | Luxury Car Supplement (£) | Total Annual Tax (£) |
| 1 | 10 | – | – | 10 |
| 2 | – | 195 | 410 | 605 |
| 3 | – | 195 | 410 | 605 |
| 4 | – | 195 | 410 | 605 |
| 5 | – | 195 | 410 | 605 |
| 6 | – | 195 | 410 | 605 |
| Total for 6 years: | £3,035 |
Mini Electric (Starting Price: £30,000)
| Year | First-Year Rate (£) | Standard Rate (£) | Luxury Car Supplement (£) | Total Annual Tax (£) |
| 1 | 10 | – | – | 10 |
| 2 | – | 195 | – | 195 |
| 3 | – | 195 | – | 195 |
| 4 | – | 195 | – | 195 |
| 5 | – | 195 | – | 195 |
| 6 | – | 195 | – | 195 |
| Total for 6 years: | £985 |
How Will the 2025 Tax Changes Affect You?
For Existing EV Owners
- Registered between 1 April 2017 and 31 March 2025: These vehicles moved to the standard rate of £195 per year.
- Cars registered between 1 March 2001 and 31 March 2017: These vehicles will move to the first band with a payable rate of £20 per year.
For Prospective Buyers
- Luxury Car Supplement: Vehicles priced over £40,000 will incur an additional £410 annual fee for five years. This means higher overall tax costs for these vehicles.
For Hybrid and AFV Owners
- The £10 annual discount for these vehicles will be removed.
- The new tax rate will depend on the vehicle’s registration date and emissions.
What Are The Pros of Buying an Electric Car Post-2025 Tax?
Even with the new tax rules having starting in April 2025, EVs still represent a compelling choice for modern drivers. Here’s how:
Lower Running Costs
Electricity is significantly cheaper than petrol or diesel. The average cost of a mile is just 4p for EVs, while petrol cars can expect to cough up 13p per mile.
These prices only drop further if you charge your car at home.
Many UK energy providers now offer discounted EV tariffs for overnight charging. This cost advantage adds up quickly, wiping away the inbound £195 road tax.
Environmental Benefits
Naturally, owning an EV appeals to eco-conscious drivers. You don’t have to be a hippy to want to reduce air pollution and greenhouse gas emissions.
Unlike petrol or diesel vehicles, EVs produce no exhaust fumes. Air quality impacts everyone – no more so than in large cities. A study by Imperial College London found that air pollution from car exhausts harmed our lungs and airways.
Even if you’re still opting with your wallet, it pays to be ahead of the curve. The UK government remains on course to achieve net-zero emissions by 2050. As EV’s will play a central role in this plan, expect future government incentives and charging infrastructure continuing to expand.
Lower Maintenance Costs
EVs have fewer moving parts compared to traditional internal combustion engine vehicles.
No oil changes, exhaust repairs, or clutch replacements means fewer trips to the mechanic. It also means less chance of an inopportune breakdown!
Drawbacks Of Buying An EV After The Tax Changes
Increased Tax Burden
Without exemption from VED, EV’s aren’t as attractive for cost-conscious drivers.
Following the first-year grace period of £10 road tax for all new EVs, you will then be subject to an annual £195 standard rate.
It only gets worse if you have a taste for the finer things in life. Luxury EVs, priced above £40,000, will have to fork over £410 annually for five years.
The end of the £0 VED benefit means the financial gap is narrowing between electric and petrol – particularly for vehicles in similar price brackets.
Rising Electricity Costs
While charging remains cheaper than refueling, rising electricity prices could affect the cost-efficiency of EVs.
With the war in Ukraine causing energy prices to fluctuate, the UK government has announced that the average price of electricity (24.5 p/kWh) will rise to 24.9 p/kWh in January 2025.
To put that into context, charging an electric car with a 60kWh battery at home currently costs around £13 per full charge (at 24.5p/kWh).
However, with the price increase to 24.9p/kWh, the cost of a full charge will rise to approximately £15.
While this might not seem like a significant difference for a single charge, over time, it adds up. If you charge your car battery 200 times over the year, you would be swallowing a £400 increase in costs due to rising electricity prices.
Conclusion
Electric vehicle ownership in the UK has changed significantly. From April 2025, all EVs will be subject to VED – ending the era of £0 exemption.
EVs still hold long-term value for drivers committed to reducing costs and emissions. The first-year tax rate of just £10 keeps EVs accessible for new buyers, while low running costs offer savings over petrol alternatives.
However, increased tax rates, rising electricity costs, and added charges for luxury EVs are worth considering.
If you are ready to explore competitive car finance options that suit your personal needs, apply for a free, no-obligation quote with Car Loans UK.
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