What is Vehicle Excise Duty? The incoming road tax rules for electric vehicles

Electric cars will soon be subject to road tax (Jens Schlueter/Getty Images)
Electric cars will soon be subject to road tax (Jens Schlueter/Getty Images)

Electric vehicles will no longer be exempt from Vehicle Excise Duty, or road tax, Chancellor Jeremy Hunt announced in his Autumn Budget.

In his statement, Mr Hunt said: “And, because the OBR forecasts half of all new vehicles will be electric by 2025, to make our motoring-tax system fairer, I have decided that, from April 2025, electric vehicles will no longer be exempt from Vehicle Excise Duty.

He added: “Company car tax rates will remain lower for electric vehicles and I have listened to industry bodies and will limit rate increases to one percentage point a year for three years from 2025.”

So what is Vehicle Excise Duty and what has changed for drivers of electric cars?

What is Vehicle Excise Duty?

Vehicle Excise Duty is better known as road tax.

Drivers pay road tax when they first register their car, and then again either every six or 12 months.

The road-tax rate a driver will pay varies based on the car’s age and CO2 emissions. Drivers of vehicles that cost more than £40,000 will have to pay an additional fee, dubbed the Tesla Tax.

Do electric vehicles have to pay road tax?

Until now, electric cars have been exempt from paying road tax.

However, as the number of electric cars in the UK is increasing, the money the Government makes from road tax is set to decline.

As a result, drivers of electric vehicles will have to pay road tax from 2025, according to Mr Hunt’s Autumn Statement.

HM Treasury said in a tweet: “The shift to Electric Vehicles is continuing at pace as the UK moves to net zero.

“Therefore from 2025, road tax will be introduced for EVs so all motorists begin to pay a fair share.  Support for charging infrastructure is continuing.”

Advocates for electric cars have said the additional cost could deter people from buying electric vehicles in the future.