You'll find everything you need to know on Electric car taxes, EV tariffs, BIK and road taxes in our Guide on Tax and Electric Vehicles.
Electric Car Tax Guide
As we work on our environmental impacts, electric vehicles (EVs) are becoming ever more popular among drivers. You might have heard that electric vehicle owners pay less car tax, or none at all, or are going to pay tax in future. So, we’ve put together a handy guide to clear things up.
Do I have to pay tax on an electric vehicle?
Any vehicle being used on the road is subject to tax. You have to register it with the DVLA, and if you aren’t planning on using it, you need to make a Statutory Off Road Notice (SORN).
But if you have an electric vehicle, you don’t currently have to pay tax. Electric vehicles are exempt from Vehicle Excise Duty (VED), also known as car tax or road tax. And, because you don’t have to use any fuel, you also don’t have to worry about fuel duty. EVs are one of several types of vehicle exempt from paying tax, including steam powered vehicles, agricultural vehicles, and vehicles made before 1982.
However, if you own a hybrid vehicle, you will have to pay both VED and fuel duty. Fortunately, it will be cheaper to tax than an Internal Combustion Engine Vehicle (ICE Vehicle), but if you want to be free of VED, electric is the way to go.
This is because for now, the first year of VED is calculated based on the CO2 emissions of your vehicle. So, gas-guzzlers like SUVs or sports cars will attract a higher rate than smaller, more efficient cars. Every year after that, there is a set rate. But if you have an electric vehicle, you won’t have to worry about any of this.
Remember: Road tax is included in a car subscription as standard.
How much tax will I save by switching to an EV?
By trading your ICE vehicle for an electric vehicle, you will save money on road tax. An electric vehicle may be an expensive purchase upfront, but even if you buy one of the more affordable electric vehicles, such as a Nissan Leaf, you would still make a saving on road tax. How much you would save depends on the CO2 emissions of your current ICE vehicle.
For the first year of ownership, the tax rate is calculated on your emissions. The lowest payable tax rate goes to ICE vehicles that only emit between 1 and 50g/km (grams per kilometre) of CO2: £10.
This may not seem like much of a savings, but from the second year on, ICE vehicles are charged an annual rate of £155. Owners of hybrids in this emissions category pay nothing in the first year.
For the next stage up, 51-75g/km, it’s £15 in the first year for a hybrid, and £25 for a standard ICE vehicle. After this, it climbs up from £105 for a hybrid and £115 for an ICE vehicle going all the way to £2245 for ICE vehicles that emit over 255g/km CO2.
But that’s just the cost for the first tax year. Afterwards, the amount of tax paid becomes a standard annual rate of up to £155 per year for petrol/diesel vehicles or £145 for hybrids. So, if you switched to an electric vehicle, you could save yourself anything between £160 and £2400 in tax within the first two years.
Electric vehicles are even exempt from the premium rate of road tax charged on vehicles worth over £40,000. This additional fee is £335, applied in the second year and then again for the next four years, totalling five years and £1675. So, if you buy an expensive electric vehicle, like a Tesla Model 3, you will automatically save £1675 in road tax over the first few years of ownership.
Subscribing to an electric vehicle will not just save you money in the form of tax. If you’re ever driving in London, you will be exempt from both the London Congestion Charge Zone and from the Ultra Low Emission Zone. This is only applicable until December 25th 2025, when that exemption ends.
If you work for a business that offers company cars, they can also claim the full cost of an electric vehicle as a capital allowance. The Workplace Charging Scheme will also enable them to get grants for installing chargers at their premises.
What is the future of tax for electric vehicles?
It is quite likely that electric vehicles will not remain tax-free forever. As mentioned, electric vehicles will be included in the London Congestion Charge Zone and the Ultra Low Emission Zone from December 2025.
But, as we look at in more detail here, there is a cross-party committee called the Transport Select Committee (TSC) looking at ways to stop a road tax shortfall from 2030 onwards. This is because from 2030, all new cars sold in the UK will have to be electric vehicles. All pre-existing ICE vehicles will still be around, and the second-hand market for them will continue for some time. This is all part of the UK’s plans to achieve net-zero carbon emissions by 2050.
Unfortunately, because electric vehicles are currently exempt from tax, banning the sale of new ICE vehicles in the UK would mean a gradual drop in the number of drivers paying road tax from 2030 onwards. This would cost the UK roughly £35 billion. On top of this, it would be somewhat unfair to make ICE vehicle owners the only drivers subject to VED after 2030. So, there may well be a new type of road tax introduced soon, one which electric vehicle owners will have to pay.
Pay per mile charges might be a future tax, you can find a guide on them here.
We can’t predict the future, but here at Wagonex, we can offer a simple way of getting an electric vehicle. Using our subscription service means you don’t have to worry about paying road tax: we do it for you.
Any tax required is rolled into the monthly payment for your subscription. So, if you wanted to drive an electric vehicle, or a hybrid, subscribe today for a quick and easy way to pay.