The government plans to tax electric vehicles from April 2025 to equalise the road vehicle excise duty with petrol and diesel vehicles
From April 2025, electric cars, vans and motorcycles will have to pay road tax in the same way as petrol and diesel vehicles.
‘This will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate,’ the government said.
new zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year;
zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate;
the expensive car supplement exemption for electric vehicles is due to end in 2025. New zero emission cars registered on or after 1 April 2025 will therefore be liable for the expensive car supplement. The expensive car supplement currently applies to cars with a list price exceeding £40,000 for five years;
zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year;
zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans;
zero emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year;
rates for alternative fuel vehicles and hybrids will also be equalised.
Company car tax (CCT) rates
The government is setting rates for company car tax until April 2028 to provide long term certainty for taxpayers and industry in Autumn Finance Bill 2022.
Rates will continue to incentivise the take up of electric vehicles:
appropriate percentages for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1% point in 2025-26;
a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars;
rates for all other vehicles bands will be increased by 1% for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.
The measure is expected to raise over £1.8bn by 2027-28. Tom Evennett, EY UK&I family enterprise leader, said: ‘Electric car owners, those considering purchasing an electric car and those considering taking out electric car leases through a company car scheme may need to recalculate the cost of owing these vehicles as the Chancellor announced that, from April 2025, electric cars will be subject to vehicle excise duty. ‘The benefit in kind rates will also increase for electric company cars from the same date (at an additional 1% per year to 2027/28). ‘This change may be required to help to support the government's finances but raises the question as to whether this will deter petrol heads from going electric. “It is notable that the Chancellor chose to act in this area, but not address the “elephant in the room”, being the fact that once cars shift to electric the government will be left without the fuel duties that currently amount to £30bn per annum. 'This points to the fact that today’s announcement may be only the start of the changes that will beset the electric vehicle market as the country transitions away from fossil fuels.'