EV road tax: What is the VED road tax?
Understanding Vehicle Excise Duty (VED) is essential for anyone considering the switch to an electric vehicle (EV). Let’s break down the VED road tax on electric cars, how much it costs, the changes coming in 2025, and the implications for leased vehicles.
We’ll provide clarity for current and future EV drivers, ensuring they have all the information they need to make informed decisions about electric car leasing.
How much road tax do electric drivers pay?
Currently, all electric cars are exempt from paying VED road tax. This has been a major incentive for drivers to switch to zero-emission vehicles and one of the many benefits of leasing an electric car. However, changes are set to take effect in 2025, meaning EV owners will need to start paying road taxes like petrol and diesel owners.
Why is road tax on electric cars changing?
The UK government is introducing a road tax for electric cars to address the shortfall in tax revenue caused by the increasing number of zero-emission vehicles on UK roads. Historically, VED was used to incentivize the adoption of EVs; now, as the take-up has accelerated, the government aims to ensure all road users contribute to infrastructure maintenance.
Wondering if electric cars are exempt from the congestion charge? Check out our helpful guide.
How much is the VED road tax in 2025?
From April 2025, newly registered EVs will follow updated VED road tax rules. EVs registered on or after 1 April 2025 will incur a first-year rate of £10, followed by the standard annual rate of £195 from the second year onwards. Meanwhile, EVs registered between 1 April 2017 and 31 March 2025 will transition directly to the standard rate of £195.
Do hybrid cars need to pay road tax?
Yes, hybrid cars are already subject to VED road tax. The amount paid depends on the vehicle’s CO2 emissions. Plug-in hybrids (PHEVs) typically pay lower rates than traditional petrol or diesel vehicles, as they emit less CO2 and have an electric-only range.
Are there additional charges for electric cars over £40,000?
Yes, starting on April 1st, 2025, new electric vehicles with a list price exceeding £40,000 will incur an additional charge known as the ‘expensive car supplement.’ This charge is £410 annually for the first five years after registration, on top of the standard rate VED.
Does the EV road tax affect leased vehicles?
Road tax is typically included in your monthly lease payment for leased vehicles. However, any changes in VED rates will mean a price increase for customers, so confirming these details is essential when arranging your lease. Leasing remains a cost-effective way to drive a new electric car, avoiding the upfront costs of vehicle ownership while still enjoying the benefits of an EV.
Example – Tesla Model Y
For example, let’s look at the Tesla Model Y Long Range. If registered from April 1st, 2025, you’ll need to pay £10 in the first year and £605 each year after that. This breaks down into the standard £195 VED rate and a £410 ‘expensive car supplement’.
Learn more about electric cars with Synergy
Switching to an EV is exciting, and understanding the financial implications is vital. Whether you’re looking to lease an electric car through salary sacrifice or want to explore the best EVs to lease this year, Synergy is happy to help.
Contact our dedicated team today for further details or to discuss your leasing options.
