The UK is going full speed ahead with Electric Vehicles (EVs), and it's crucial to grasp how changes in road tax will affect current and future EV owners. These changes reflect the government's commitment to sustainability and the shifting car industry dynamics. Until April 1, 2025, EV owners enjoy exemptions from road tax and some congestion charges.
Buying an EV comes with a great perk: first-year allowances. Until March 31, 2025, businesses can claim a 100% allowance on EVs, deducting the full vehicle cost from taxable profits. The same applies to businesses setting up EV charging points. While cars miss out on annual investment allowances, most vans qualify, possibly for government grants too.
From April 1, 2025, newly registered zero-emission cars pay a modest £10 for the first year, then £180 annually. This applies to those registered between April 2017 and March 2025 too. However, electric cars lose their exemption from the Expensive Car Supplement in 2025, adding extra costs for those over £40,000. Low-emission cars registered between March 2001 and March 2017 move to a £20 yearly tax rate.
Zero-emission vans join the ranks of petrol and diesel vans, costing around £290 a year for most. Electric motorcycles and tricycles pay a nominal £22 annually. Although the government plans fairer tax rates for Alternative Fuel Vehicles and Hybrids, details are scarce.
EVs also enjoy low benefit-in-kind (BiK) rates, staying at 2% until April 2025, and then increasing by 1% yearly until 2028. This makes tax planning easier and cheaper compared to high-emission vehicles.
While EVs used to dodge Vehicle Excise Duty (VED), that changes from 2025 when they'll face the same rates as petrol and diesel cars. Despite increased tax costs for company EVs, they're still cheaper and greener than their fossil fuel counterparts. But considering the looming end of tax perks in 2025, buying an electric car sooner rather than later might be a smart move.
