Laws for Vehicle Tax on Electric and Low Emission Vehicles in 2025
Road tax, formally known as Vehicle Excise Duty (VED), is determined by the CO2 emissions produced by your vehicle, its list price, and the year it was registered. Currently, electric vehicle (EV) owners are exempt from paying VED, with no annual tax charges applied.
However by April 2025, the UK vehicle tax landscape will experience some significant changes for electric and low-emission vehicles, primarily aimed at reshaping incentives as the market for these vehicles matures.
Changes for Electric Vehicles (EVs) - EV Road Tax
As of April 2025, EV owners will be required to pay Vehicle Excise Duty (VED) (also know as EV road tax) on their cars. The tax will initially be at the standard rate, which is £190 as of August 2024, though this amount may increase in the future.
Plug-in Hybrids and Low-Emission Vehicles
Plug-in hybrid vehicles (PHEVs) and other low-emission cars, which currently benefit from reduced rates of VED, will also see changes in 2025. Their VED rates will continue to be based on their emissions, but the thresholds for lower rates may change to reflect evolving standards in environmental performance. For instance, the CO2 emissions limit for the lowest VED band may become stricter, incentivizing manufacturers to produce even cleaner models.
First-Year Rate: The first-year VED for low-emission vehicles, including plug-in hybrids, will remain tied to their CO2 emissions. The lower the emissions, the lower the rate, but rates for higher-emitting hybrids may rise.
Standard Rate: After the first year, plug-in hybrids will also pay the standard rate of VED, similar to petrol and diesel cars, but possibly with a lower rate for particularly low-emission models.
Company Car Tax for EVs and Low-Emission Vehicles
The company car tax regime, known as Benefit-in-Kind (BIK) tax, has been one of the most attractive incentives for EVs and low-emission vehicles. The BIK tax rate is based on the car's list price, CO2 emissions, and the driver's income tax bracket.
EVs and BIK Rates in 2025
Currently, fully electric vehicles attract very low BIK tax rates—just 2% for the tax year 2023/2024. This has been instrumental in encouraging businesses and employees to switch to EVs. However, from 2025 onwards, these rates will begin to rise as the government gradually scales back the tax advantages for EVs.
2025 Company Car Tax for EVs: From April 2025, the BIK rate for electric vehicles will increase, though the exact rise will be gradual to avoid a sudden shock to the market. The government has announced incremental increases, which will see the BIK rate for EVs rise to 3% in 2025, and it may continue to increase modestly in subsequent years.
Low-Emission Vehicles
Low-emission vehicles such as plug-in hybrids currently benefit from lower BIK tax rates than conventional petrol or diesel cars. However, as the focus shifts towards zero-emission vehicles, the tax benefits for hybrids are likely to reduce over time.
BIK for Plug-in Hybrids: In 2025, the BIK rate for plug-in hybrids and other low-emission vehicles is expected to rise, although they will still enjoy lower rates than traditional combustion-engine vehicles. The specific BIK percentage will depend on the vehicle's CO2 emissions, but drivers of higher-emission plug-in hybrids may see their tax bills increase.
Why Are These Changes Happening?
The upcoming changes to vehicle tax for electric and low-emission vehicles reflect the growing adoption of EVs in the UK market. While government incentives were essential in encouraging the early adoption of electric and hybrid vehicles, the rapid increase in EV sales means that these incentives are becoming less necessary.
By 2025, the UK government expects electric vehicles to be much more common, and the changes to VED and BIK tax will ensure that tax revenue from vehicles remains sustainable as petrol and diesel car sales decline.
Additional Government Measures
In addition to the changes in VED and BIK, the UK government has implemented other measures to support the transition to electric vehicles. For instance:
Grants for EV Charging: The government continues to offer grants for installing home and workplace EV charging stations, though these schemes may be reduced or phased out as EV infrastructure becomes more widespread.
Clean Air Zones: In some cities, low-emission zones or clean air zones may introduce additional charges for high-polluting vehicles, incentivizing the use of electric and low-emission cars even further.
Government guidelines: How the changes will affect your vehicle
Electric and low emission cars registered on or after 1 April 2025
You will need to pay the lowest first year rate of vehicle tax (which applies to vehicles with CO2 emissions 1 to 50g/km). From the second tax payment onwards, these vehicles will pay the standard rate. This is £190 for 2024 but is subject to change for 2025.
Electric and low emission cars registered between 1 April 2017 and 31 March 2025
You will pay the standard rate. This is £190 for 2024 but is subject to change for 2025.
Electric and low emission cars registered between 1 March 2001 and 31 March 2017
These vehicles will move to the first band that has a VED value. This is £20 for 2024 but is subject to change for 2025.
Hybrid and alternatively fuelled vehicles (AFVs)
The £10 annual discount for hybrid and AFVs will be removed, and the rate you will pay will depend on when the vehicle was first registered. If the vehicle was:
registered before 1 April 2017 - this rate will depend on the vehicle’s CO2 emissions (check the current rates for this vehicle)
registered on or after 1 April 2017 - you will pay the standard rate (this is £190 for 2024 but is subject to change for 2025)
Electric vans
Most electric vans will move to the standard annual rate for light goods vehicles. Check the current rates for this vehicle.
Electric motorcycles
Electric motorcycles and tricycles will move to the annual rate for the smallest engine size. Check the current rates for this vehicle.
Additional rate (expensive car supplement)
For new electric vehicles with a list price exceeding £40,000, you will now need to pay the expensive car supplement from the second tax payment onwards. This applies to vehicles registered on or after 1 April 2025.
Vehicle Excise Duty (VED) in 2025
By 2025, the tax landscape for electric and low-emission vehicles will change significantly. While the tax advantages for EVs have been substantial in recent years, the removal of VED exemptions and the gradual rise in BIK rates signal the government's shift towards a more balanced approach as EVs become mainstream. However, electric and low-emission vehicles will still remain financially advantageous compared to petrol and diesel cars, particularly for company car drivers.
As the market evolves and the UK's commitment to reducing carbon emissions intensifies, electric and low-emission vehicles will continue to play a central role in the future of transportation, even as the tax environment changes.
Source: Gov.uk
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