How much tax will I pay on an electric car?
Free road tax has made electric cars an attractive choice in recent years.
With charging typically setting you back less than filling up at the pump, used EVs tend to have lower running costs than petrol or diesel cars. One of the key running costs for cars is road tax. Every car owner, electric, petrol, or diesel, must tax their vehicle via the vehicle tax website, over the phone, or at a Post Office. While many petrol and diesel car owners either make a one-off payment for six or 12 months, or use a monthly Direct Debit, electric car owners can complete the tax process for free. However, with fresh changes to UK road tax set to come into effect from April 2025, you might be uncertain about what you’ll need to pay on your electric car. To clear things up, CarSupermarket’s experts have put together this complete guide to road tax on electric cars, including everything from the current rules, luxury car tax, and company car tax.
Return to the EV hubHow much will electric car tax be in 2025?
Electric car owners will have to pay the standard rate of road tax from 1 April 2025 as a series of changes come into effect. The standard rate of road tax is currently £190 per year, but this could change in 2025. Some electric car owners will pay a reduced rate in the first year, depending on the age of the vehicle.
Road tax on electric cars over £40,000 in 2025
Electric cars registered on or after 1 April 2025 that have a list price of over £40,000 will also need to pay an expensive car supplement – also known as luxury car tax.
Keep in mind that any optional extras and upgraded trim levels are added to the list price. This means that a £36,000 car with £5,000 worth of additional features will qualify for the expensive car supplement.
All cars above £40,000 are required to pay the tax – not just electric cars. It works out at £410 per year during this period, beginning from the second year you own the car. It’s paid in addition to the standard rate for five years.
Will I pay electric car tax per mile?
Ahead of the 2024 UK Budget announcement, there were proposals and discussions around a new pay-per-mile road tax for electric cars.
It was suggested that the new ‘road duty’ would cost electric owners around 6p per mile plus VAT and replace the traditional vehicle road tax.
However, the government stated later in 2024 that there are no immediate plans to introduce electric car tax on a per mile basis and instead pushed on with changes to the current system.
Company car tax on electric cars
Company car tax is also known as Benefit in Kind (BiK) and paid every year when a company car is used for personal use as well as work. You might’ve wondered why electric cars are so often favoured as company cars.
This is because company car tax rates are decided by the follow factors:
The car’s value
Factor 1CO2 emissions
Factor 2EV mileage range
Factor 3Income tax bracket
Factor 4Fully electric cars are on the lowest end of the scale when it comes to CO2 emissions, so you’ll pay the lowest BiK rate. For electric cars this is currently 2% of the car’s value – for petrol and diesel cars, this can be around 25%, and even as high as 37%. If your electric car’s range is below 129 miles, there is a small increase, but almost all electric cars will still pay 5% or less. This percentage represents how much of your electric car’s value is taxable. So, for a £50,000 electric car, 2% of this – which is £1,000 – will be taxable. How much you pay of that £1,000 depends on your tax income bracket. For example, if you’re on a 20% income tax rate, you’ll need to pay £200 a year. To compare this with a £50,000 petrol or diesel car on the typical 25% BiK rate, the taxable amount would be £12,500. You would then need to pay £2,500 a year, a whopping £2,300 more than the electric alternative.
The company car tax rates are changing from 1 April 2025 and will raise by 1% for the next three years.
For example, if you’re currently on the 2% BiK rate for your electric car, you’ll pay tax on:
2024/2025 - 2%
2025/2026 - 3%
2026/2027 - 4%
2027/2028 - 5%
While this increase will lead to electric cars becoming more expensive to run as a company car, they will still be far cheaper than petrol or diesel cars.
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