Electric vehicles (EVs) in the UK are no longer exempt from Vehicle Excise Duty (VED), commonly known as road tax, since April 2025. These changes, alongside adjustments to Benefit-in-Kind (BIK) tax rates for company cars, represent a significant shift in the financial landscape for EV owners and prospective buyers. Understanding these regulations is crucial for managing the total cost of EV ownership and making informed decisions. This guide provides a clear overview of how these tax changes impact you, offering practical advice on optimising your EV running costs.
With new tax changes for electric vehicles, managing your running costs efficiently is more important than ever. Fuse Energy helps you do this by providing clear pricing and real-time usage data to optimise your home charging. Click here to switch to Fuse Energy today.
The end of VED exemption for electric cars
Since April 2025, electric cars, vans, and motorcycles are subject to VED, aligning them with petrol and diesel vehicles. This change means that EVs no longer benefit from the full VED exemption they previously enjoyed. All electric car drivers are now required to pay road tax.
Why the tax changes are happening
The government introduced these changes to ensure that all motorists contribute fairly to road maintenance and public funds, especially as the number of electric vehicles on UK roads continues to rise. This move aims to create a level playing field and address the reduction in fuel duty revenue as more drivers switch to electric cars. The changes were initially announced in the Autumn Statement 2022.
VED rates applying from April 2025
From April 2025, electric cars registered on or after 1 April 2025 pay the lowest first-year VED rate of £10. From the second year onwards, they pay the standard annual rate, which is currently £190 per year.
How VED applies to different EV ages
The VED rates vary depending on when your electric vehicle was first registered:
- Electric cars registered between 1 April 2017 and 31 March 2025 now pay the standard rate of £190 per year.
- Electric cars registered before 1 April 2017 (specifically between 1 March 2001 and 30 March 2017) will move to the lowest VED band, currently £20 per year.
Expensive car supplement for EVs
The expensive car supplement, sometimes referred to as 'luxury car tax', now applies to electric vehicles. This supplement applies to EVs with a list price exceeding £40,000. For eligible EVs, this adds an extra £410 per year, paid annually from the second to the sixth year of registration. This means the supplement applies for five years in total, and you will not pay it in the first year.
Current and future BIK rates for EVs
Benefit-in-Kind (BIK) tax rates for company electric vehicles are set to increase incrementally. For the 2026/27 tax year, the BIK rate for fully electric cars is 4%. This rate will rise to 5% in 2027/28, 7% in 2028/29, and 9% in 2029/30. These rates are confirmed by His Majesty's Revenue and Customs (HMRC) and published on GOV.UK.
Impact on company car drivers
While BIK rates are increasing, electric company cars remain significantly more tax-efficient than their petrol or diesel counterparts, which can be taxed at up to 37%. The gradual increase aims to provide long-term certainty for taxpayers and the industry.
The introduction of VED and increasing BIK rates means that while EVs remain a cost-effective choice, managing other running costs is more important than ever.
Optimising home charging strategies
Home charging is typically the most economical way to power an EV. By optimising your charging habits, you can significantly reduce your electricity bills. This often involves charging during off-peak hours when electricity is cheaper. Consider a home EV charger installation to make this process more efficient.
The role of smart meters and dual-rate tariffs
A smart meter is essential for taking advantage of dual-rate variable tariffs. These tariffs offer different electricity prices depending on the time of day, allowing you to charge your EV when rates are lowest. Fuse Energy's app provides clear usage data, helping you monitor and manage your electricity consumption, which is crucial for optimising these costs. If you don't have one, a smart meter installation can unlock these benefits.
Other cost-saving tips for EV owners
- Monitor energy usage: Regularly check your electricity consumption through your smart meter data to identify patterns and areas for improvement. Learning how to read your smart meter can help you stay informed.
- Consider a home battery: A home battery can store cheaper off-peak electricity or surplus solar generation for use during peak times, further reducing reliance on the grid.
- Maintain your vehicle: Regular maintenance can prevent costly repairs and ensure your EV operates efficiently.
Potential for mileage-based taxation
The government plans to introduce a new mileage-based charge for electric and plug-in hybrid vehicles, known as eVED, from April 2028. This aims to ensure all vehicles contribute to road infrastructure based on their usage.
Staying informed about future updates
Tax policies can evolve, so staying informed about official announcements from the UK government and HMRC is crucial. These changes were initially announced in the Autumn Statement 2022, and further updates may occur in future fiscal events.
Making the most of your electric vehicle means staying on top of your energy costs. Fuse Energy offers transparent pricing, real-time usage data through our app, and 24/7 human customer support to help you manage your home charging efficiently. Switching to Fuse is quick and easy, allowing you to take control of your energy bills.
Ready to optimise your EV running costs? Click here to switch to Fuse Energy today. You can also learn more about our mission to make energy simpler and more sustainable here.
