What will EV Road Tax cost in the UK from April 2025, and How can we avoid paying it for one more year?

The UK government is ending the zero Tax band for electric vehicles (EVs). Not only will there be a charge from next April (2025), but the charge will be much higher than for lower-polluting vehicles. It’s a bizarre decision and one that, as EV owners ourselves, we find difficult to understand.

So, we wrote this article to detail the EV road tax changes and show you how to avoid paying for one more year.

This article will be updated to show the latest Tax Rates for EVs, reflecting the changes in the October 2024 budget.

What Is Changing for EV Road Tax in the UK in April 2025?

From April 2025, EVs will no longer be exempt from Vehicle Excise Duty (VED), often called road tax. Previously, owners of fully electric cars enjoyed zero road tax, making EVs a cost-effective choice compared to their petrol or diesel counterparts. This change marks a shift in the government’s policy, aiming to generate revenue as EVs become mainstream.

Here’s a breakdown of what you can expect:

• For New EVs Registered on or After April 2025: These vehicles will be subject to the standard VED rates, starting with a first-year rate based on CO2 emissions. After the first year, they will transition to the standard flat rate.
• Luxury Car Surcharge: New EVs registered on or after April 1st, 2025, with a list price above £40,000, will also have to pay an additional premium VED surcharge of £390 annually for five years from the second year of registration.
• For EVs Registered Before April 2025: If you already own an EV or purchase a used one before April 2025, it will remain exempt from VED until April 2025. After that, these vehicles must also pay the standard flat rate but not the luxury surcharge.

How Much Will It Cost to Tax a Tesla or Any Other EV Next Year?

If you’re wondering, “How much does it cost to tax a Tesla next year?” or any other EV, here’s what you need to know:

• Standard VED Rate for EVs: For most EVs, the annual road tax will align with the standard rate applicable to traditional cars. For the 2024-2025, this is expected to be around £165 per year.
• Luxury EVs Over £40,000: If your EV has a list price over £40,000 (which many Teslas do), you’ll need to factor in the additional £390 surcharge. This means that for these vehicles, the total annual road tax could reach approximately £555 from April 2025.

Can You Avoid Paying Road Tax on Your EV for an Extra Year?

Yes, there is a strategy that can delay the start of your road tax payments—retaxing your EV just before the changes come into effect.

Here’s how it works:

• Retax Your EV in March 2025: If you have a used EV, ensure you retax it in late March 2025. This means you’ll renew the vehicle’s tax just before the new rules take effect.
• Why This Works: When you tax a vehicle, you pay for 12 months upfront. Doing this before the April 2025 changes essentially locks in another year without paying the new VED rates.
• Who This Applies To: This method only applies to used EVs purchased and registered before April 2025. New EVs bought after this date will automatically fall under the new tax rules.

A Step-by-Step Guide to Retaxing Your EV in March

1. Check Your Current Tax Expiry Date: This information can be found in your vehicle logbook (V5C) or on the DVLA website. Make sure it is due for renewal in March 2025.
2. Apply for a New Tax in Late March: You can renew your vehicle’s tax up to a month before it expires. To gain the maximum benefit, renew in the last week of March 2025.
3. Pay for 12 Months: When renewing, opt for the 12-month payment plan to lock in your current rate.
4. Verify with the DVLA: While this strategy is expected to work based on current DVLA rules, double-check with the DVLA for any last-minute policy changes. https://www.gov.uk/guidance/vehicle-tax-for-electric-and-low-emissions-vehicles

Why Is the Government Introducing Road Tax for EVs?

With the growing popularity of EVs, the UK government has shifted its approach to ensure that all road users contribute to maintaining infrastructure. Previously, the zero road tax was a way to incentivize early adoption of EVs. Still, now that electric vehicles have become more mainstream, the policy is evolving to balance the books.

Here are a few reasons behind this change:

• Increased EV Adoption: The surge in EV sales means that more drivers are now benefiting from zero road tax, leading to reduced tax revenues from traditional vehicles.
• Sustainability Goals: While road tax for EVs might seem counterintuitive, the UK’s broader focus remains on reducing emissions and supporting green technology. The government is working to balance incentives for EVs with the need for revenue.
• Road Infrastructure Funding: The revenue generated from VED is used to fund road maintenance and infrastructure improvements, and as more drivers switch to EVs, a more equitable system is required.

What Does This Mean for the Future of EV Ownership?

For prospective EV buyers, these changes mean considering the long-term ownership costs alongside the upfront purchase price. Here’s what to keep in mind:

• Total Cost of Ownership: Even with the new road tax costs, EVs can still be cheaper over their lifespan than petrol or diesel vehicles due to lower fuel and maintenance costs.
• Future Resale Values: Adding a road tax charge could potentially impact the resale values of certain EV models. Cars that previously benefited from zero road tax might see a shift in market perception.
• Continued Government Incentives: Despite the VED change, the government still offers grants and incentives to support EV buyers, such as discounts on home charging points and lower company car tax rates.

Summary: Taxing Your EV in 2025

To recap:

• Starting from April 2025, all EVs in the UK will be subject to road tax, ending the era of zero tax for electric cars.
• For most EV owners, this means an annual fee of around £165, with luxury models over £40,000 paying around £555.
• You can delay paying this new tax for an extra year by retaxing your EV in late March 2025.
• Be proactive and plan to make the most of your EV ownership experience.

Conclusion: Prepare Now to Save Later

The changes to road tax for EVs represent a significant shift, but with some savvy planning, you can minimize their impact on your finances. If you own a used EV, act before April 2025 to secure one more year of zero road tax; for those looking to buy a new EV, factor in the new VED rates to get an accurate picture of ownership costs. Understanding these changes ensures you make the right decisions for your budget and driving needs.

With this guide, you can navigate the upcoming changes and keep your EV running as cost-effectively as possible!

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