Electric cars started paying Vehicle Excise Duty (VED, or road tax) in April 2025, ending years of exemption. A year on, we’ve broken down what this actually costs EV drivers each month, and whether electric cars still beat petrol and diesel on overall running costs.
What EVs now pay in road tax
From April 2025, new electric cars pay two types of VED. In the first year, you pay nothing (the “first registration fee” for zero-emission vehicles is £0). From year two onwards, you pay the standard rate, which is £195 per year at the time of writing. That works out to about £16.25 per month.
If your EV cost more than £40,000 when new, you also pay the expensive car supplement of £425 per year for five years (years two to six). Combined with the standard rate, that’s £620 per year, or roughly £52 per month, during those five years. From year seven, you drop back to the standard £195 annually.
Petrol and diesel cars pay the same rates, except their first-year fee varies wildly based on CO2 emissions. A new petrol BMW 3 Series, for example, pays £220 in year one, then the same £195 standard rate (or £620 if it cost over £40,000) as an EV.
How this changes monthly costs across different ownership types
Buying outright or on PCP
Take a Volkswagen ID.3 Pro with a list price of £39,995 (just under the expensive car threshold). You now pay £195 per year in VED from year two, or about £16 per month. That’s new money you weren’t paying before April 2025.
Compare that to a petrol Volkswagen Golf with a similar specification at around £32,000. It pays £220 in year one, then £195 annually thereafter. The monthly VED cost from year two is identical.
Now consider a Tesla Model Y Long Range at £54,990. You’ll pay £620 per year (£52 per month) for years two through six because of the expensive car supplement. A comparable petrol Audi Q5 at £52,000 pays the same £620 during that period. The VED playing field is now level.
Company cars
Company car drivers don’t pay VED directly (your employer does), but it’s worth understanding because the total cost of running fleet vehicles can influence what cars companies choose to offer.
The bigger picture for company car drivers remains Benefit in Kind (BIK) tax, where EVs still have an enormous advantage. A £45,000 EV pays 3% BIK in the 2025/26 tax year. If you’re a 40% taxpayer, that’s £540 per year, or £45 per month. The same £45,000 petrol car at 28% BIK costs you £5,040 per year (£420 per month). The VED your employer now pays on the EV barely registers against that saving.
Salary sacrifice
Most salary sacrifice schemes roll all costs into your monthly payment, including VED. Providers like Octopus Electric Vehicles or Loveelectric typically add about £16 to £52 to your monthly lease cost depending on the car’s list price, but you won’t see it as a separate line item.
The critical point is that EVs still attract 3% BIK, meaning your National Insurance and income tax savings remain substantial. A £16 monthly VED cost is irrelevant when you’re saving several hundred pounds per month compared to buying the same car conventionally.
Do EVs still make financial sense?
Yes, in most scenarios. The VED changes add £195 to £620 annually, but EVs still cost significantly less to fuel. Charging at home on an overnight EV tariff like Octopus Intelligent Go (7.5p per kWh at the time of writing) costs roughly £600 per year for 10,000 miles. The same mileage in a petrol car averaging 45mpg at current fuel prices costs around £1,600 per year. You’re still £1,000 per year better off, even after paying VED.
For company car drivers, the BIK advantage is so large that VED is essentially a rounding error. And anyone who bought an EV before April 2025 should check their V5C carefully. Some pre-2025 EVs are still incorrectly coded for the old zero-rate VED, meaning you might not owe anything yet, though DVLA may eventually catch up.
The real takeaway: if you dismissed EVs because they “now pay road tax”, run the actual numbers for your situation. The monthly difference is smaller than most people assume, and the fuel savings still stack up. If you’re considering an expensive EV just over the £40,000 threshold, though, it’s worth seeing whether a slightly cheaper variant could save you £425 per year for five years. That’s £2,125 over the life of the supplement, which might be enough to make you reconsider heated seats.