EVs subject to VED from April 2025
Up until now, electric vehicles have been exempt from vehicle excise duty (VED) in the UK, but we all knew it was a case of ‘when’ not ‘if’ that perk would be removed. Now we know: Labour’s first budget means that EV owners will pay VED from the 1st April 2025.
In fact, the decision to make electric cars pay VED was announced by former Tory Chancellor of the Exchequer, Jeremy Hunt, in his 2023 Autumn Statement. Labour has simply implemented the plan.
The first year’s VED is pegged at the lowest rate of £10, while the second year will cost owners £190 per year, equal to the standard rate for petrol and diesel cars. For the first time, EVs will also be subject to the Luxury Car Fee which means that for cars that cost £40,000 or more new, there will be a fee of £410 per year to pay from years two to six after the car’s first registration.
Given that EVs tend to have higher list prices than their ICE equivalents, there’s an argument that this hits electric cars more than it does those that burn fossil fuels. The Luxury Car Fee continues when the car reaches the second-hand market, so buyers will need to be aware of the car’s new price including options. There are also new rates of vehicle excise duty for cars with internal combustion engines that come into effect from next April.
The official line from the government states: “To ensure all drivers begin to pay a fairer tax contribution, this measure will bring electric vehicles, which do not currently pay VED, and AFVs and hybrids, which pay a discounted rate, into the motoring tax system, in the same way as petrol and diesel vehicles.
“The government will continue to use the tax system to support the transition to electric vehicles, including using favourable first-year VED rates for the lowest-emission cars; favourable Company Car Tax rates for low-emission vehicles, and through generous first year capital allowances for zero-emissions cars and vans as well as for EV chargepoint equipment.
"The government will also continue to support the transition to EVs more broadly, including through the continuation of the plug in van grant and banning the sale of new petrol and diesel cars and vans from 2030."
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