Eco-friendly credentials, improved charging infrastructure and the potential to slash road tax rates have seen the popularity of electric cars soar over the past few years. Also known as Battery Electric Vehicles (BEVs), electric cars have zero tailpipe emissions.
Unlike vehicles with internal combustion engines (ICEs) which are taxed based on emissions, electric cars sidestep Vehicle Excise Duty (VED). Instead, the government slashes road tax rates for EVs – a perk that makes electric cars a great choice for motorists looking to save.
Of course, there are some important factors to consider when calculating the financial benefits of EV ownership. In this guide, we will dive into the finer details of electric car road tax in the UK, exploring whether EVs are subject to VED, and how it affects different types of vehicles, including BEVs, hybrids and leased cars. We'll also discuss how road tax is calculated and the differences between first-year and standard rates. If you’re considering purchasing or leasing an EV, this guide is for you!
One of the major benefits of electric car ownership in the UK is the exemption from standard road tax. The British government is committed to accelerating the adoption of EVs and the road tax exemption is part of this scheme.
The hope is to encourage British motorists to make the switch to electric vehicles and as a result, reduce national carbon emissions, improve air quality and combat climate change.
Unlike petrol and diesel-powered vehicles, electric cars produce zero tailpipe emissions. This makes them far more eco-friendly than their ICE counterparts, which emit around 120 to 150 grams of CO2 into the atmosphere per kilometre.
Waiving annual road tax until 2025 is one of several government incentives designed to reduce the cost of EV ownership and promote nationwide adoption of electric cars.
While electric cars are exempt from road tax in the UK, hybrid car owners face a slightly different scenario. They’re not exempt from VED but do enjoy significantly reduced road tax rates, compared to ICE vehicles.
Rates are calculated according to CO2 emissions, which can vary depending on the type of hybrid. For example, plug-in electric hybrids (PHEVs) have more all-electric range than mild electric hybrids (MEVs), which are powered primarily by internal combustion engines and use an electric motor for assistance. This means road tax rates are typically much lower for PHEVs.
Road tax is calculated using CO2 emissions at the time of production. List price also plays a role in determining road tax rates in the UK. Standard VED is split into three tax bands designed to reflect CO2 emissions.
Lower-emission vehicles are taxed less while higher-emission vehicles pay more. EVs fall into the emission-free category, which makes them exempt from standard road tax.
Here are the current annual rates:
In the UK, all new vehicles are subject to an initial first-year road tax rate. Also known as the showroom tax, it’s applied to brand-new vehicles and calculated using expected CO2 emissions for the first 12 months of registration.
After the first year has elapsed, the vehicle is taxed using standard rates. Like standard VED, first-year road tax is split into different bands designed to reflect CO2 emissions.
Here are the current first-year tax rates, calculated according to CO2 emissions:
Currently, like standard road tax, electric cars don’t pay any showroom tax, no matter the value of the vehicle. This rate is set until 2025.
No, being exempt from standard road tax is one of the biggest perks of EV ownership in the UK. The government is serious about promoting the adoption of electric vehicles and road tax exemptions are one of the biggest incentives.
That said, there are talks of swapping the traditional emissions-based formula for a mileage-based road tax system. This would ensure that all vehicles on British roads, including EVs, contribute to costs like maintenance and infrastructure.
While mileage-based VED may eventually be introduced, change isn’t expected until at least 2025. This means EV owners will still enjoy several years of road tax exemption.
Zero maintenance responsibilities and reduced cost of ownership are two of the biggest benefits of leasing a car. Typically, most car lease agreements include road tax as part of the package.
Instead of paying road tax monthly or annually, the leasing company will take care of payment for the duration of your lease. This streamlines your financial responsibilities and rolls everything into one, easy-to-manage payment.
For motorists who don’t want to deal with the administrative responsibilities of car ownership, this makes leasing a hassle-free option. Leasing an electric car can be a great way to get behind the wheel of an emissions-free vehicle without committing to ownership.
Want to enjoy the financial benefits of driving an EV? Get in touch with the Leasing Options team today to discuss how auto finance can help you secure the keys to bestselling all-electric models like the Tesla Model 3 and KIA EV6, as well as PHEVs like the Volvo XC90.
Leasing Options understands waiting for a new car isn't always possible. Maybe your lease is ending or your car is old, or you like new models. Regardless, we offer in-stock car leases to meet your needs, which could be delivery within as little week.
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