If you own an electric car registered between April 2017 and March 2025, you’re now receiving your first Vehicle Excise Duty (VED) bill. That £195 annual charge, which kicked in from 1 April 2025, marks the end of EVs’ road tax exemption. And if your car cost more than £40,000 when new, you’re looking at £195 plus an additional £425 ‘expensive car supplement’ for the first five years of ownership, bringing your total to £620 annually.
For drivers who bought their EVs expecting never to pay road tax, it’s an unwelcome surprise. So what does this actually mean for your wallet over the time you own the car?
The Real Cost Over Ownership
Let’s start with the standard rate. At £195 per year, you’re paying about £16.25 per month. Over a typical three-year lease or PCP term, that’s £585. Over five years of ownership, it’s £975. Not devastating, but not nothing either.
The expensive car supplement stings harder. If your EV’s list price exceeded £40,000 when new (which includes most family EVs like the Kia EV6, Tesla Model Y, or Hyundai Ioniq 5), you’ll pay that extra £425 annually for years two through six of the car’s life. That’s £2,125 total over five years, or about £35 per month during those years when it applies.
Combined, an owner of a £45,000 EV registered in April 2024 will pay £195 in year one (2025-26), then £620 per year for the next five years, then £195 annually thereafter. Over a typical five-year ownership period from new, that totals £2,675, or roughly £45 per month.
How It Compares to Petrol and Diesel
Here’s where it gets interesting. A petrol or diesel car registered in the same period pays VED based on its CO2 emissions in the first year, then the standard rate (also £195 as of April 2025) thereafter. A family SUV emitting 130g/km of CO2, for instance, pays £220 in year one, then the same £195 annually as an EV.
The expensive car supplement applies identically to petrol, diesel, and electric vehicles over £40,000. So for cars in that bracket, you’re paying exactly the same road tax regardless of fuel type after year one.
In other words, the VED advantage for EVs has narrowed dramatically. It hasn’t disappeared entirely (electric cars avoid the higher first-year rates that high-emission vehicles face), but it’s no longer the clear-cut saving it once was.
Does This Change the Business Case?
For private buyers, the new VED rates add a modest but real cost to EV ownership. However, the main financial advantages of running an EV remain: dramatically lower fuel costs (typically £500 to £800 less per year compared to petrol, depending on your mileage and whether you can charge at home), reduced servicing costs, and no ULEZ or Clean Air Zone charges.
For company car drivers, nothing has changed where it matters most. Benefit-in-Kind tax on electric company cars remains at 2% of the car’s list price for 2025-26, compared to 25% or more for equivalent petrol or diesel models. On a £45,000 EV, that’s a saving of several thousand pounds annually in personal tax, completely dwarfing the £195 VED charge (which your employer pays anyway on a company car).
The Early Adopter Sting
The genuinely frustrating bit is for those who bought between April 2017 and March 2025 expecting permanent VED exemption. The government made no secret of its intention to bring EVs into the VED system, but many buyers reasonably assumed their specific vehicles would remain exempt under the rules in force when they purchased.
If you bought a £35,000 EV in 2022, you’ve now lost a benefit you factored into your buying decision. And if you bought a £50,000 one, you’re now facing five years of £620 annual bills you hadn’t budgeted for. There’s no retrospective protection for existing owners, which feels particularly pointed for those who adopted EVs early when charging infrastructure was shakier and model choice more limited.
What to Actually Do
If you’re already receiving these bills, check your Direct Debit is set up correctly through the DVLA’s online portal. You can pay annually, every six months, or monthly (though monthly payments attract a small surcharge, bringing the annual total to about £207).
If you’re considering buying an EV, factor the £195 annual VED into your calculations, and check whether the model you’re looking at exceeds the £40,000 threshold. Sometimes a lower trim level dips just under that limit, saving you over £2,000 across five years. On a lease, that’s roughly £35 per month you could negotiate on the monthly payment instead.
The VED exemption was good while it lasted, and losing it stings for those who bought accordingly. But at £195 annually, or about the cost of two tanks of petrol, it’s not the cost that makes or breaks the case for an EV. That still comes down to how much you drive, where you charge, and whether you’re running it through a company car scheme.