Electric vehicles were once completely exempt from road tax in the UK. That exemption ended on 1 April 2025. If you own, lease, or are considering an electric car, understanding the new tax rules is no longer optional. This guide covers every aspect of EV taxation in the UK for 2025/26 and beyond, in plain, straightforward terms.
What Is the EV Tax on Electric Cars in the UK?
Electric car taxation in the UK covers two distinct areas: Vehicle Excise Duty (VED), commonly known as road tax, and Benefit-in-Kind (BiK) tax for electric company cars. Understanding both is essential for EV owners and business drivers alike.
Vehicle Excise Duty (VED)
VED is the annual tax charged on vehicles registered and used on UK public roads. Until 31 March 2025, pure battery electric vehicles (BEVs) were exempt. From 1 April 2025, EVs became subject to VED for the first time, bringing them into the same tax framework as petrol and diesel vehicles, albeit at different rates.
Benefit-in-Kind (BiK) Tax
The BiK tax applies to company car drivers who use an employer-provided vehicle for personal journeys. The tax is calculated as a percentage of the car’s list price, with the percentage determined by the vehicle’s CO2 emissions. Electric vehicles attract significantly lower BiK rates than petrol or diesel equivalents, making them a highly tax-efficient company car option.
Two Key Points Every EV Owner Should Understand:
- VED now applies to all electric cars registered on or after 1 April 2025
- BiK rates for electric cars remain far lower than for combustion engine vehicles
The introduction of VED for EVs marks a significant policy shift. The exemption existed to incentivise EV adoption. As uptake has grown, the government has moved to create a more level playing field across vehicle types, while still maintaining meaningful tax advantages for electric vehicles over petrol and diesel alternatives.
Why the UK Government Introduced Road Tax for Electric Vehicles
The decision to end the EV VED exemption was not made overnight. It reflects a combination of fiscal pressures, policy evolution, and long-term transport strategy.
The Core Reasons Behind The Policy Change Are Straightforward:
Declining Fuel Duty Revenue
As EV adoption increases, petrol and diesel consumption falls, reducing fuel duty receipts significantly. Fuel duty raises approximately £25 billion annually for the Treasury. The shift to electric vehicles creates a structural gap in government revenue that VED extension partially addresses.
Fairness Across Vehicle Types
Petrol and diesel drivers have always paid VED. As EVs become mainstream rather than niche, the argument for a blanket exemption becomes harder to justify politically and fiscally. The government’s position is that EV drivers should contribute to road maintenance costs alongside other road users.
EV Adoption Has Reached Critical Mass
The original exemption was designed to incentivise early EV adoption when the technology was expensive, and the charging infrastructure was limited. With EVs now representing a significant and growing share of new car sales, the incentive rationale has diminished.
Alignment With The 2050 Net-Zero Commitment
The government’s long-term strategy is to decarbonise transport, not to provide permanent tax advantages to specific vehicle types. Bringing EVs into the VED framework is consistent with a transition from incentive-based policy to mainstream taxation as the market matures.
The change is significant, but it does not eliminate the tax advantages of electric vehicles. BiK rates remain far lower than for petrol and diesel cars, and VED rates for EVs are structured to be less burdensome than for high-emission vehicles.
What Is the Current VED Rate for Electric Cars in the UK?
From 1 April 2025, electric cars will be subject to VED across three registration categories. The rates below apply for the 2025/26 tax year.
New Electric Cars Registered On Or After 1 April 2025:
| VED Element | Rate (2025/26) |
| First-year rate | £10 |
| Standard annual rate (from year 2) | £195 |
| Expensive Car Supplement (if list price exceeds £40,000) | £425/year for years 2–6 |
Electric Cars Registered Between 1 April 2017 And 31 March 2025:
| VED Element | Rate (2025/26) |
| Standard annual rate | £195 |
| Expensive Car Supplement (if list price exceeded £40,000) | £425/year (years 2–6 from first registration) |
Electric Cars Registered Before 1 April 2017:
| Registration Period | VED Rate |
| Pre-April 2017 electric cars | £20/year (standard historic rate) |
The Expensive Car Supplement: What You Need To Know:
- Applies to any car with a list price above £40,000 at first registration
- Charged in addition to the standard annual VED rate
- Applies from the second year of registration through to the sixth year
- Adds £425 per year, meaning total annual VED of £620 for affected vehicles
- Many popular electric cars, including the Tesla Model 3 and Model Y, exceed the £40,000 threshold
Key Points To Note:
- The first-year rate of £10 for new EVs is significantly lower than for high-emission vehicles
- From year two onwards, EVs pay the same standard rate as most other vehicles
- The Expensive Car Supplement disproportionately affects EVs, given their typically higher list prices
- Zero-emission vehicles still attract lower first-year rates than petrol and diesel equivalents
These rates are set for the 2025/26 tax year and are subject to annual review through the Budget process. EV owners should check the latest DVLA guidance each year to confirm current rates.
How Benefit-in-Kind Tax Works for Electric Company Cars in 2026
For company car drivers, Benefit-in-Kind tax remains one of the most compelling reasons to choose an electric vehicle. Despite gradual rate increases, EV BiK rates remain dramatically lower than those for petrol and diesel cars, representing a significant ongoing tax advantage for both employees and employers.
How The BIK Tax Is Calculated:
BiK tax is calculated using three variables:
| Variable | What It Means |
| P11D value | The list price of the car, including options, excluding the first registration fee and VED |
| BiK percentage | Determined by CO2 emissions, lower emissions mean a lower percentage |
| Income tax rate | Your marginal income tax rate, 20%, 40%, or 45% |
The formula: P11D value × BiK percentage × income tax rate = annual BiK tax liability
Bik Rates For Electric And Low-Emission Cars, 2025/26 To 2027/28:
| Tax Year | Pure Electric (0g/km CO2) | 1–50g/km with 130+ mile EV range | Petrol/Diesel (typical) |
| 2025/26 | 3% | 5% | 25–37% |
| 2026/27 | 4% | 6% | 25–37% |
| 2027/28 | 5% | 7% | 25–37% |
Worked Example: Electric Vs Petrol Company Car:
| Electric Car | Petrol Car | |
| P11D value | £45,000 | £35,000 |
| BiK percentage | 3% | 30% |
| Taxable benefit | £1,350 | £10,500 |
| Tax at 40% (higher rate) | £540/year | £4,200/year |
| Annual tax saving | £3,660 |
Employer National Insurance savings: Employers also benefit from lower BiK values. Employer Class 1A National Insurance is charged at 13.8% on the BiK value. A lower BiK value on an electric company car reduces the employer’s NI liability, generating a direct cost saving alongside the employee’s tax benefit.
Key Points For Company Car Drivers Choosing An EV In 2026:
- A 3% BiK rate in 2025/26 represents an exceptional tax advantage over petrol and diesel equivalents
- The rate is rising, planning for 4% and 5% rates in subsequent years is important
- Salary sacrifice schemes for electric vehicles remain highly attractive, given the low BiK rates
- The combination of low BiK and employer NI savings makes EVs the most tax-efficient company car option available
The BiK advantage for electric company cars is expected to persist well beyond 2028, even as rates gradually increase. The gap between EV and combustion engine BiK rates remains significant enough to make electric vehicles the clear tax-efficient choice for company car drivers for the foreseeable future.
Common Misconceptions About EV Tax and Road Tax for Electric Cars
Confusion around EV taxation is widespread, and some misconceptions can lead to unexpected costs or missed planning opportunities.
1: Electric Cars Are Still Exempt From Road Tax
This was true until 31 March 2025. From 1 April 2025, all electric cars registered in the UK are subject to VED. The exemption no longer exists. EV owners who have not yet taxed their vehicle need to do so through the DVLA in the same way as any other vehicle owner.
2: The Road Tax Rate For EVs Is The Same As For Petrol Cars
Not entirely accurate. New EVs registered from April 2025 pay a first-year rate of just £10, significantly less than the first-year rates for high-emission petrol and diesel vehicles, which can reach £2,745. From year two, EVs pay the standard £195 rate, the same as most other vehicles. The Expensive Car Supplement may apply on top for higher-value models.
3: Bik Tax Makes Electric Company Cars Expensive
The opposite is true. At 3% in 2025/26, EV BiK rates are a fraction of those for petrol and diesel vehicles. A higher-rate taxpayer driving a £45,000 electric company car pays just £540 in BiK tax annually, compared to potentially £4,000 or more for a comparable petrol car.
4: Salary Sacrifice For EVS Is No Longer Worth It
Salary sacrifice arrangements for electric vehicles remain highly tax-efficient precisely because of the low BiK rate. Employees reduce gross salary, saving income tax and National Insurance, while the low BiK charge on the vehicle keeps the overall cost well below market alternatives. The low BiK rate is what makes salary sacrifice for EVs so compelling.
5: All EVs Pay The Expensive Car Supplement
The supplement only applies to vehicles with a list price above £40,000. Many electric cars, particularly smaller models and entry-level EVs, fall below this threshold and are not subject to the additional £425 annual charge. Always check the list price at first registration, not the purchase price after discounts.
6: Road Tax For EVs Will Keep Increasing To Match Petrol Cars
The government has stated that VED for zero-emission vehicles will remain lower than for high-emission alternatives. The current rate structure, with a low first-year rate and standard rate from year two, reflects a deliberate policy to maintain an incentive for zero-emission vehicle ownership while broadening the tax base.
The most important action for EV owners is to verify their VED status, understand when and how the Expensive Car Supplement applies, and take advantage of the remaining BiK advantages for company car drivers before rates rise further in the coming years.
Final Thoughts
Zero road tax for electric vehicles is gone, but the tax advantages over petrol and diesel remain significant. VED rates for EVs are still structured favourably, and BiK rates for electric company cars remain one of the most valuable tax-efficiency opportunities available to UK drivers and employers.
Private owners should register for VED and check whether the Expensive Car Supplement applies. Company car drivers should act on the 3% BiK rate now, before annual increases reduce the advantage. The savings are material and worth planning around.
FAQs
Do Electric Cars Pay Road Tax In The UK Now?
Yes, from 1 April 2025, all UK electric cars are subject to VED. New EVs pay £10 in year one and £195 annually from year two onwards.
What Is The Road Tax Rate For Electric Cars In 2025/26?
New EVs pay £10 in the first year and £195 from year two. Models with a list price above £40,000 also pay the £425 Expensive Car Supplement, bringing the total annual VED to £620.
What Is The Bik Rate For Electric Company Cars In 2025/26?
Pure electric company cars attract a 3% BiK rate in 2025/26, rising to 4% in 2026/27 and 5% in 2027/28. This remains far below the 25–37% rates applied to petrol and diesel equivalents.
Does The Expensive Car Supplement Apply To Electric Cars?
Yes, if the list price exceeded £40,000 at first registration. The supplement adds £425 per year from years two to six, and many popular EV models exceed this threshold.
Is Salary Sacrifice For Electric Cars Still Worth It In 2026?
Yes. The 3% BiK rate makes EV salary sacrifice one of the most tax-efficient employee benefits available. Employees save income tax and National Insurance while keeping overall costs well below market alternatives.
Why Did The Government End The EV Road Tax Exemption?
Declining fuel duty revenues and growing EV adoption made the blanket exemption fiscally unsustainable. EVs retain meaningful tax advantages over petrol and diesel, but through a more targeted structure.
How Do I Tax My Electric Car With the DVLA?
Tax online at gov.uk/vehicle-tax, by phone on 0300 123 4321, or at a Post Office. You will need your V5C logbook, V11 reminder, or new keeper supplement to complete the process.
