Electric car drivers warned of rising vehicle tax bills

Electric car drivers are facing new vehicle tax regulations that could cost them £600 next year.

Currently, most EVs are exempt from Vehicle Excise Duty, but the DVLA has said that all electric vehicles priced over £40,000 will incur a new charge from 1 April 2025.

Tax expert Andy Wood from Tax Natives said: “The new tax framework indicates that any electric or low-emission vehicle registered after 1 April 2025 will incur the lowest first-year rate of vehicle tax, applicable to those with CO2 emissions between 1 and 50 g/km. After the first payment, these vehicles will transition to a standard annual rate of £190.

“The £600 charge results from combining this standard rate with an additional £410 surcharge for vehicles over the £40,000 threshold. With the average price of new electric vehicles now around £40,000—compared to £30,000 for traditional internal combustion engine vehicles—more than half of newly registered EVs will be impacted by this increase.”

Vehicle tax bills

Hybrid and alternatively fuelled vehicles will also see changes to how they are taxed, with rates determined based on CO2 emissions.

Wood concluded:

“The implications of these tax changes highlight the need for motorists to reassess the financial viability of their choices. With more EVs surpassing the £40,000 threshold, the landscape for electric vehicle ownership is set to become considerably more complex.”