What the 2025 Vehicle Excise Duty (VED) Changes Mean for EV Drivers

From April 2025, electric vehicles (EVs) will no longer be exempt from Vehicle Excise Duty (VED), but will benefit from cheaper preferential first-year rates compared to their petrol and diesel counterparts.

While this marks a significant shift for EV owners, it’s important to understand what the VED changes mean in practice and how they’ll affect both current and future EV drivers.

What is the VED?

The Vehicle Excise Duty (VED), also known as Road Tax, is an annual tax paid by vehicle owners in the UK.

Until now, VED revenue has come solely from petrol and diesel vehicle owners, under a ‘polluter/user pays’ principle. Since EVs produce zero tailpipe emissions, they have to date been exempt from VED.

However, to ensure that the tax system remains fair and sustainable as more people make the switch to EVs and the country transitions towards net zero, the government is updating the tax system to ensure that funding to maintain maintenance and management of the road network continues.

This means that starting April 2025, the EV exemption will end, and EV drivers will need to start paying VED.

What are the VED Changes?

Here’s a breakdown of what to expect:

• For New EVs Registered on or After 1 April 2025:
  • The first-year rate for EVs will increase to the lowest band of £10 until 2029-30.
  • After that first year, EVs will be subject to the standard annual rate of £195 (current rate)

• For EVs Registered Between 1 April 2017 and 31 March 2025:
  • These vehicles will transition to the standard rate of £195 annually starting from April 2025.

• Luxury Car Tax / Expensive Car Supplement (ECS):
  • EVs with a list price of £40,000 or more will also be subject to the Expensive Car Supplement (also called the Luxury Car Tax) of £355 annually – on top of VED – for the first 5 years following the first year of registration.
  • In this year’s Autumn Budget, the Government formally recognised the disproportionate impact of ECS on EVs given they are typically more expensive than ICE vehicles. Whilst not taking action on this, the Government stated it will “consider raising the threshold for zero emission cars only at a future fiscal event, to make it easier to buy electric cars.”

The Road Ahead

While the introduction of VED changes the cost landscape slightly for EVs, they remain a key driver of cleaner transport and cheaper to run over their lifetime.

The introduction of VED on EVs is seen as necessary by the Government considering their growing number on UK roads. But despite the increased cost implications, the overall tax burden remains much higher for more polluting cars. A similar approach was taken on Company Car Tax, which is similarly increasing for EVs but with much more preferential rates than ICE vehicles.

As always, EVA England is keeping an eye on all the policy changes that affect EV drivers and advocating for measures to support current and future EV owners through this transition.