From April 1, 2025, electric vehicle (EV) owners in the UK will face significant changes to their vehicle excise duty (VED), marking the first time they will need to pay car tax. The new regulations will require all new electric, zero, or low-emission car buyers to pay a first-year rate of £10, while existing EV owners will see their annual fees rise to £20. This change is part of a broader overhaul of the UK's car tax system, which aims to align EV fees more closely with those of petrol and diesel vehicles.
The updates come amid rising concerns that these new tax obligations could deter potential buyers from making the switch to electric vehicles. According to reports, the new tax structure will also affect hybrid cars, which will see their first-year tax rise from £0 to £110 for vehicles emitting between 1 and 50g/km of CO2.
Starting April 1, 2025, the standard annual VED for all vehicles, including electric ones, will be set at £195 from the second year of ownership. This standard rate will apply to electric vehicles priced over £40,000, which will also incur an additional Expensive Car Supplement (ECS) of £425, bringing total annual fees for some owners to a staggering £620.
The changes have sparked a wave of concern among environmental advocates who fear that imposing taxes on electric vehicles may undermine efforts to encourage their adoption. Critics argue that the tax could dissuade drivers from choosing greener options, especially as the UK pushes towards its climate goals.
Matt Walters, Head of Consultancy Services and Customer Value at Ayvens, noted that new cars will bear the brunt of these tax changes, potentially costing electric vehicle drivers an additional £1,300 over a four-year lease. He stated, "New cars bear the brunt of tax changes. This has left fleets and private motorists in the dark about a tax policy that could cost electric vehicle drivers an additional £1,300 over a four-year lease contract." This sentiment highlights the confusion and frustration that many drivers feel regarding the upcoming tax changes.
Additionally, Richard Evans, head of technical services at webuyanycar, suggests that drivers looking to avoid the new charges should consider re-taxing their electric vehicles before March 31, 2025. He explains, "If you re-tax your EV before March 31, you can enjoy another year's tax-free motoring," potentially saving drivers £195.
The government has also announced increases to the first-year road tax for new car drivers, impacting millions of motorists across the UK. This includes an increase to the Expensive Car Supplement for vehicles worth £40,000 or more when new. The supplement, which has been in place since 2017, will now apply to all new battery electric vehicles priced at £40,000 or more starting from April 1, 2025.
For classic car enthusiasts, the situation is equally concerning. Motorists driving classic cars first registered between 1985 and 2001 will also see their VED charges increase as of April 1, 2025. Under current regulations, classic cars are exempt from VED charges 40 years after their initial road registration. Thus, cars manufactured before January 1, 1985, will become exempt, while those registered just after this date will still be subject to increased VED charges.
Vehicles registered between 1985 and 2001 will pay VED fees based on engine size, with different rates depending on the model. Analysis from motoring expert Pete Barden indicates that vehicles with engines below 1,549cc will incur a charge of £220 over the 2025/26 tax year, up from the current fee of £210. Those with larger engines above 1,549cc will face a fee of £360, reflecting a £15 increase from the previous £345 charge.
Despite the tax increases, HM Revenue & Customs (HMRC) has characterized these adjustments as a standard uprating to match Retail Price Index inflation. They assert that while the fees will impact drivers, they will "remain unchanged" in real terms. HMRC stated, "This measure will impact on motorists owning a car, van or motorcycle or using a motorcycle trade licence. The increase in Vehicle Excise Duty rates is in line with Retail Price Index meaning rates will remain unchanged in real terms for vehicle owners."
As the April 1 deadline approaches, drivers are urged to assess how these changes will affect them. Many will need to consider their options, whether that means re-taxing their vehicles early or exploring alternative vehicle choices to minimize their tax liabilities. The changes have sparked a mix of confusion and concern among motorists, who are now left navigating a complex landscape of new tax obligations.
With the government pushing for a greener future, the introduction of taxes on electric vehicles raises important questions about the balance between encouraging sustainable transportation and the financial burdens placed on drivers. As millions prepare for the new tax regime, the potential implications for EV adoption and the broader automotive market remain to be seen.
