Understanding Car Tax for All Vehicles: Major Changes Ahead for Electric Car Owners for 2025

All you need to know about UK Tax Bands

In the UK, vehicle tax bands are determined by factors such as fuel type, emissions, and engine size, depending on when the vehicle was first registered.

For cars registered on or after April 1, 2017, the tax is based on one of three VED bands: zero, standard, or premium. Vehicles with zero emissions fall into the zero band, while the standard and premium bands apply to other vehicles, with premium rates for more expensive models.

For cars registered between March 1, 2001, and March 31, 2017, the rates are divided into different CO2 bands—the lower the tailpipe emissions, the lower the vehicle tax.

Before you can tax a vehicle, it must have valid car insurance and, if it’s older than three years, a valid MOT. Without these, you won’t be able to legally tax your vehicle and drive on UK roads.

Electric Car Road Tax – Changes 2025

Let’s talk about one of the big changes on the horizon for electric vehicles (EVs) and Vehicle Excise Duty (VED). Starting April 1st, 2025, EVs will lose their VED exemption, meaning that new EV buyers will have to pay the next lowest first-year tax rate, which currently stands at £10 and this for the first year only. While this initial cost might seem small, it signals the end of the "no VED" perk that made EVs even more attractive.

But that’s not all—once an EV hits its second year on the road, owners will be required to pay the standard VED rate, which is currently £190 and expected to increase in April 2025. So, while the shift might not be a major financial hit at first, it’s clear that the cost of owning an EV will rise over time, potentially reducing one of the key incentives for going electric.

If you’re buying an electric vehicle (EV) with a price tag above £40,000, there’s an additional cost to factor in. Starting from the second year of ownership, you’ll be liable for an extra annual fee for five years. Currently, this fee is £390 per year, but it’s expected to increase in 2025, making higher-end EVs more expensive to own.

But it’s not just new EVs that are affected. Owners of used electric cars will also start paying VED for the first time from April 2025. Zero-emission vehicles first registered between April 1, 2017, and March 31, 2025, will be subject to the standard annual rate, which is currently £190 a year. This marks a significant change for EV owners, who have enjoyed VED exemptions up until now.

Starting in April 2025, hybrid car owners will see some changes in their Vehicle Excise Duty (VED) as well. The £10 discount that currently applies to hybrids in the first subsequent year will be eliminated, meaning hybrid owners will pay the same VED as those with petrol or diesel engines.

Additionally, car tax is set to become more expensive for older vehicles with the lowest emissions. The annual VED rate for cars registered between March 1, 2001, and April 1, 2017, with CO2 emissions of up to 100g/km, will no longer be free. Instead, it will increase to £20 per year. This change will affect owners of older, low-emission vehicles who have previously enjoyed exemption from these charges.

Tax bands for cars registered after April 2017

On April 1st, 2017, the UK introduced a new vehicle tax system for newly registered cars, moving away from the previous CO2-based VED structure. Under this new system, cars are taxed according to one of three different road tax bands: zero, standard, or premium. This change applies only to vehicles registered after April 2017.

The shift was driven by the significant drop in CO2 emissions levels, which had led to many car owners paying little to no VED. This, in turn, resulted in substantial revenue losses for the Treasury, prompting the government to revamp how road tax is calculated. Now, instead of focusing solely on emissions, the system incorporates a more standardized approach to ensure that more vehicles contribute to road tax.

For vehicles registered after April 2017, there's an additional cost known as the "Showroom Tax" in the first year. Unlike the standard road tax bands, this first-year VED is still based on the vehicle’s CO2 emissions. This means that the more your vehicle emits, the higher the tax you'll pay in the first year.

After the first year, a flat rate applies. Most drivers will pay the standard rate of £190 per year, regardless of the vehicle’s emissions. This system was designed to ensure that the initial environmental impact of a vehicle is reflected in the tax, while simplifying the ongoing cost from the second year onward.

Currently, zero-emission vehicles are exempt from VED, which has been a key incentive for going electric. However, if you buy a new car with a list price over £40,000, you’ll face an additional charge of £410 on top of the standard VED rate in the first year.

But changes are coming. From 2025, electric vehicles will no longer be exempt from VED, meaning EV owners will need to pay road tax for the first time. This marks a significant shift in vehicle taxation as the government adjusts to the increasing number of low and zero-emission vehicles on the road.

What happens to road tax when I sell my car?

This is something not to be caught out by with changes to the system on buying a new car which was introduced in October 2014.  So now you are unable to transfer any unexpired tax to the new registered keeper which means a new owner most ta the car before driving away.

If you are selling a vehicle let the DVLRA know and any remaining tax will be refunded.  

Why do we have to pay VED?

VED which is Vehicle Excise Duty, or some people know it as road tax.

It was first introduced in1937 which replaced the old tax system it is basically ta for you using a vehicle on public roads in the UK.