Road tax on electric cars: what you need to know

June 27, 2022 by

Looking to switch to an electric car but unsure on how the tax system applies to an EV? Read on to find out

Electric cars (EVs) bring many benefits. They produce no on-road emissions, they offer strong performance and an easy driving experience, and they also have lower running costs compared to their petrol and diesel counterparts.

One of the running costs implicit in running a conventional car is road tax, technically known as VED, or vehicle excise duty. The good news for EV drivers – either current or potential – is that electric cars are exempt from road tax – for now.

As ever, there is more to the subject than this, so read on for all the details.

What is road tax and how is it calculated?

Road tax is linked to three things: a car’s price, its carbon dioxide (CO2) emissions, and whether it is a conventional petrol or diesel car, or an alternatively fuelled vehicle (AFV – think hybrids and plug-in hybrids).

Just to make things a little more complicated, road tax is also split into three different areas of payment:

  • The first year’s road tax
  • Subsequent years of road tax
  • Road tax surcharge for more expensive cars

The first year’s road tax

When a new car is registered for the first time, the first owner must pay for the first year’s road tax, and this is different from all subsequent years.

This payment is based on a car’s CO2 emissions. The maximum price of road tax in the first year stands at £2,365, and this applies to cars that emit 255 g/km (grams per kilometre) or more of carbon dioxide.

Owners of vehicles that emit 0g/km of CO2 do not have to pay a penny for the first year of road tax, though – this means EV drivers, plus owners of hydrogen cars (although there are very few of these) are exempt from this cost.

Subsequent years of road tax

After the first year or road tax has been paid, things appear to get a little more simple, with a flat annual rate of £165 standing for all cars – apart from AFVs, which get a £10 discount.

Road tax surcharge for more expensive cars

We say things appear to get more simple, because as with almost all areas of tax law, there’s another layer of granularity, and this concerns cars that cost over £40,000 when new – note this price is the sale price, so if you order a £35,000 car but specify £5,001 on optional extras, your car will be subject to the surcharge.

The road tax surcharge for cars costing over £40,000 stands at £355 a year, though this surcharge only applies for five years. Because the first-year rate of road tax is separate, this means the surcharge applies once the car turns one year old, and must be paid each year for a further five years – in addition to the flat rate of £165 (£155 for hybrids).

It used to be the case that electric cars were subject to the £355 surcharge, but in April 2020 the rules were changed, and EVs are now exempt from this, just as they are exempt from the flat-rate annual tax (for now). Hybrids are still liable for the surcharge, however.

Electric vehicles can also enter the London Ultra-Low Emissions Zone (ULEZ) without incurring the £12.50 charge that other cars do. As more cities in the UK adopt such zones, you might find yourself able to move around a bit more freely in an electric car.

Electric cars pay road tax from 2025

Do note that from April 2025 all electric cars registered from April 2017 will have to pay the £165 annual road tax tarrif (rising to £180 from 1 April 2023), while new EVs first registered from April 2025 onwards will also be subject to the expensive car supplement.

Do you pay road tax on electric cars?

Not at the moment – though as explained above, while EVs are exempt from road tax at the moment, this exemption ends from April 2025.

Will you have to pay electric car road tax in the future?

This is, naturally, a less clear-cut topic. At present, there are only around 400,000 EVs on UK roads, out of a total of 31 million or so cars.

The vast majority of car owners are therefore paying road tax, but as EVs grow in popularity before they effectively become the only option for new-car buyers in 2035, the Treasury will face a huge dent in its revenue stream, which logic dictates will need to be plugged.

Buy your next electric car with carwow

If all this has made you think that your next car should be an electric one, we’ve got some great offers for you.

Head over to our EV deals page where you can find the latest models at attractive prices, while if you have an existing car you’d like to find a new home for, our Sell My Car service will see dealers bid on your motor, leaving you to simply pick the best offer.