Electric Cars Are No Longer Tax-Exempt—Including Older Models

It was only a matter of time before the tax breaks on electric vehicles (EVs) came to an end. Starting April 1, 2025, any EV registered will be subject to a ￡10 first-year vehicle excise duty (VED), followed by ￡195 annually. For EVs registered between 2017 and 2024, the ￡195 annual VED will apply from April 2025. Older EVs (pre-2017) will pay ￡20 annually.

EVs Now Subject to ‘Luxury Car Tax’

The government defines an "expensive" car as one with an RRP above ￡40,000, which triggers the Expensive Car Supplement (ECS) tax. This adds ￡410 to your VED for the first five years after registration. While EVs were previously exempt, this will no longer be the case from April 2025. As of April 2024, the average price of a new car was just under ￡42,000, meaning many cars now qualify as “expensive” in the eyes of the government. That said, affordable new EV options are still available.

EVs Still Cheaper to Run Thanks to CO2-Based Tax

EVs remain much cheaper to run, especially in the first year. All cars will pay ￡195 in VED starting in their second year, along with the ECS for five years from year two onward.

For Example: Porsche Macan

If you're comparing petrol and electric Porsche Macans in April 2025, the petrol version will cost ￡4,680 in VED in the first year, while the electric model will cost just ￡10. After that, both will follow the standard VED rate of ￡195 annually, plus the ￡410 ECS for five years. While the petrol Macan is ￡15k cheaper upfront, leasing your electric Macan means your VED cost is included in the monthly payments, making it a simpler calculation.

VED Increases for Petrol, Diesel, and Hybrid Cars in 2025

For vehicles emitting 1-50g/km CO2 (mostly plug-in hybrids), the first-year VED will rise from ￡10 to ￡110. Cars emitting 51-75g/km CO2 will jump from ￡30 to ￡130, while those emitting 75g/km CO2 or more will see the first-year rate double. If you're looking to buy a petrol, diesel, or hybrid vehicle, you might want to register it before April 1, 2025, to lock in current tax rates. Alternatively, buying a used car could also save you money.

Company Car Tax (BIK) Increases Across the Board

The Benefit-in-Kind (BIK) tax rate for zero-emission vehicles will increase by 1 percent annually from 2025 to 2028. Starting at 2 percent, it will rise to 3 percent in 2025, 4 percent in 2026, and 5 percent in 2027. For vehicles emitting 75g/km CO2 or more, the BIK will rise by 1 percent in April 2025 and remain the same until at least 2028. The tax scale based on CO2 emissions will cap at 37 percent for high-emission vehicles (over 170g/km).

Pick-Up Trucks Lose Company Car Tax Loophole

Starting in April, pick-up trucks will no longer enjoy special tax treatment. While we’re not suggesting you, a suburban office worker, are using a pick-up truck as a tax loophole, this change could have significant financial implications if you're running one as a company vehicle. From April, double-cab pick-ups will be treated like regular passenger cars for tax purposes, leading to much higher BIK charges.

For Example: Ford Ranger

Previously, the BIK for commercial vehicles like pick-up trucks was fixed at ￡3,960 regardless of emissions or price. From April, a high-priced double-cab pickup, such as a ￡50k Ford Ranger, will fall under a 37 percent BIK rate. That means ￡3,550 in yearly tax for 20 percent taxpayers, or over ￡7k for 40 percent taxpayers.