How Much Will Electric Car Tax Be in 2025?

Understanding the Changes to Electric Car Tax in 2025 and How Much You’ll Need to Pay

Electric vehicles (EVs) have rapidly grown in popularity over the last few years, largely due to the environmental benefits and cost-saving opportunities, including the exemption from car tax. However, as we move towards 2025, there are some significant changes coming that all electric car owners need to be aware of.

In this guide, we’ll walk you through everything you need to know about the upcoming electric car tax changes, including how much you’ll need to pay, when these changes take effect, and how you can still save money with your EV after these adjustments.

The Current State of Electric Car Tax

As of 2024, electric vehicles have enjoyed the benefit of being exempt from car tax. This was a significant draw for many people switching to electric cars, as it helped reduce the overall cost of owning and maintaining the vehicle. However, this exemption will end in April 2025.

Starting from April 2025, all electric car owners will need to pay the standard vehicle tax, just like owners of petrol or diesel vehicles. This marks a major shift in how electric vehicles are taxed and could impact how much it costs to run an electric vehicle in the UK.

What Does This Mean for Electric Car Owners?

If you’re thinking of buying an electric car or already own one, it’s important to understand how the tax system will work going forward. Let’s break down the new tax structure for electric cars starting in 2025.

• First-Year Tax Rate: In 2025, the first-year road tax rate for electric cars will be the lowest possible tax band, which is set at £10 for the first year.
• Second-Year and Beyond: Starting in the second year of ownership, electric car owners will be required to pay the standard rate of £190 per year for road tax. This amount is set to be similar to what owners of petrol and diesel vehicles pay annually.

The Additional Luxury Car Tax

One significant change is the introduction of an additional luxury car tax for electric vehicles priced above £40,000 when new. If you’re purchasing an electric car that costs more than this threshold, you’ll need to pay an additional £410 per year starting in the second year of ownership. This will be applicable for a total of five years.

It’s important to keep in mind that this luxury tax is not unique to electric vehicles. Traditional petrol, diesel, and hybrid vehicles with a list price over £40,000 have been subject to this additional tax for years. However, for electric cars, this represents a new tax that could affect the overall cost of owning a high-end EV.

How Do You Pay for Electric Car Tax?

The process of paying for your electric car tax will be the same as with any other vehicle. You can pay for your car tax in a variety of ways:

• Online: The most convenient method is paying through the official government website, where you can select the period for your car tax and pay via Direct Debit.
• At the Post Office: You can also pay at your local Post Office by providing your car’s details and paying in person.
• By Phone: If you prefer, you can call the DVLA and pay via phone using a debit or credit card.

It’s worth noting that the process for transferring the car tax when you buy or sell an electric vehicle has not changed. The new owner will simply need to pay the tax, and if you decide to take your car off the road (by registering it as SORN), the same process applies.

What Other Changes Are Expected?

While the main tax structure is clear, there are a few other changes and clarifications that might come into play as we approach 2025. Here are some key points to consider:

1. Exemptions: Some drivers may still be exempt from paying road tax, such as individuals with certain disabilities. It’s expected that these exemptions will remain in place, but this will be confirmed in the lead-up to the changes.
2. Government Incentives: As part of the push to make EVs more accessible, the government might also roll out additional incentives, subsidies, or tax credits for electric vehicle buyers to help offset the new tax burdens.
3. Other Road Taxes: Some regions may impose their own road taxes or charges for EV owners, including congestion charges or low-emission zone fees. These will be subject to local government regulations and policies.

How Much Will Electric Car Tax Cost in 2025?

Starting in April 2025, the overall cost for electric car tax will break down as follows:

• First Year: £10 for the first year (the lowest possible vehicle tax).
• Second Year Onwards: £190 per year.
• Luxury Car Tax: £410 per year for EVs priced over £40,000 when new. This will apply from the second year and continue for the next five years.

These amounts are subject to change, depending on any updates to government policy or inflation adjustments, so it’s always best to check your car’s specific tax band when the time comes.

How to Minimise Your Electric Car Tax Costs

While the changes to electric car tax might feel like a setback, there are still ways you can minimise your overall costs. Here are a few tips:

1. Choose a Car Under £40,000: The easiest way to avoid the luxury car tax is by choosing an electric vehicle that costs less than £40,000 when new. There are plenty of options available in this price range, including the Kia e-Niro, Skoda Enyaq, and the Mini Electric.
2. Buy a Used Electric Car: Purchasing a used electric vehicle can also help you avoid paying the full price for a new car. Just make sure to check the original price of the car to ensure it doesn’t qualify for the luxury car tax.
3. Opt for Free Charging Points: Many employers and supermarkets offer free EV charging stations, so take advantage of these as much as possible to reduce your overall charging costs. However, these might become less common as the popularity of EVs increases, so it’s a good idea to enjoy these perks while you can.
4. Look for Special EV Tariffs: Many energy providers offer special tariffs for EV owners, which can help reduce the cost of charging your car at home. Compare different providers to find the best deal.
5. Plan for Lower Maintenance Costs: Electric vehicles typically require less maintenance than petrol or diesel cars, as they have fewer moving parts. This can result in long-term savings on things like engine repairs, oil changes, and brake servicing.
6. Government Incentives and Grants: Keep an eye out for any government grants or subsidies aimed at EV owners, which could help offset the increased tax costs.
   

What Electric Cars Will Be Affected by Luxury Car Tax?

If you’re looking to purchase a luxury electric car, be prepared to pay the additional £410 per year if your car’s list price exceeds £40,000 when new. Some of the most popular electric vehicles that will be affected by this tax include:

• Porsche Taycan
• Ford Mustang Mach-E
• BMW i4 and i5
• Tesla Model S and Model X

These models and other luxury EVs will be subject to the additional luxury car tax for five years, starting in the second year of ownership. Be mindful of the cost, as it can significantly impact your annual running costs.

The Impact of Electric Car Tax on Your Wallet

Although these changes to the electric car tax might seem like a setback for potential EV buyers, it’s important to remember that electric cars are still far cheaper to run than petrol or diesel cars in the long term.

Fuel costs for petrol cars have fluctuated dramatically in recent years, with prices as high as £1.91 per litre, but they have stabilised around £1.45 per litre. In comparison, the average cost to charge an electric vehicle is around 24.5p per kWh, which can be as low as £15 to fully charge a 60kWh battery.

Even with the new tax, the overall cost of running an electric car remains lower than a traditional combustion engine vehicle. The tax changes are unlikely to outweigh the benefits of fuel savings, fewer maintenance requirements, and reduced emissions.

Frequently Asked Questions (FAQs)

1. Will I still be exempt from road tax if I have a disability?

• Answer: Disability exemptions are likely to remain in place for electric vehicles, as they do for petrol and diesel cars. You should check the official government website closer to the changes to confirm eligibility.

2. How do I pay the road tax for my electric car?

• Answer: You can pay your electric car road tax through the government website, at the Post Office, or by phone. Payment can be made as a one-off lump sum for six or twelve months, or via monthly Direct Debit.

3. How much will it cost to charge my electric car?

• Answer: Charging costs can vary, but on average, it costs around 24.5p per kWh to charge an electric car at home. A full charge for a car with a 60 kWh battery typically costs around £15, but costs may vary depending on your electricity tariff and where you charge.

4. Are all electric cars subject to the luxury car tax?

• Answer: No. Only electric vehicles that cost more than £40,000 when new are subject to the luxury car tax. If your electric car costs less than this, you won’t need to pay the additional £410 tax.

5. Will electric vehicles still be exempt from ULEZ charges after 2025?

Answer: Yes, electric vehicles will remain exempt from Ultra Low Emission Zone (ULEZ) charges until at least December 2025. However, future changes to ULEZ regulations could affect this exemption.

Conclusion

The introduction of road tax for electric vehicles in 2025 marks a significant change for EV owners, but the financial impact won’t necessarily be severe for all drivers. By choosing a lower-priced model, being mindful of charging costs, and utilising government incentives, you can still enjoy the many benefits of driving an electric car without breaking the bank.

As the tax changes approach, it’s important to keep an eye on any additional government announcements and updates that could affect your car tax rates and ensure you’re ready for the new system. The future of electric cars is still bright, and these changes are just a small part of the journey toward a more sustainable transportation system.