Electric cars currently pay nothing in Vehicle Excise Duty, the tax most people call road tax or car tax. That changes from April 2027, when EVs registered from April 2025 onwards will start paying the same VED as petrol and diesel cars. If you’re weighing up whether to buy an EV now or wait, here’s what the tax change actually means in pounds and pence.
What EVs Will Pay From April 2027
Under the current VED structure, which applies to petrol and diesel cars registered after April 2017, you pay a first-year rate based on CO2 emissions, then a standard rate of £190 per year (at the time of writing) from year two onwards. Electric cars will follow the same pattern, minus the CO2-based first year charge since they produce no tailpipe emissions.
From April 2027, EVs registered from 1 April 2025 will pay the standard rate of £190 annually. That’s about £16 per month. EVs registered before April 2025 keep their exemption permanently, which is why some buyers are wondering whether to rush in before the deadline.
There’s a catch, though, and it’s an expensive one.
The £40,000 Trap That Catches Most EVs
Any car with a list price over £40,000 when new pays an additional £410 per year (current rate) on top of the standard charge, starting from the second time you tax it. This “expensive car supplement” applies for five years, from years two to six of the car’s life.
Do the maths: that’s £190 standard rate plus £410 supplement, totalling £600 per year for five years. Over those five years, you’ll pay £3,000 in VED. After year six, the supplement drops off and you return to paying the standard £190 annually.
Most electric cars cost more than £40,000. A Volkswagen ID.4, Kia EV6, Tesla Model Y, Polestar 2, and virtually every electric SUV or family car currently on sale crosses that threshold. Even smaller models like the Cupra Born or MG4 can breach £40,000 once you add a larger battery or move up a trim level.
The list price is what counts, not what you actually paid. Negotiate a £5,000 discount on a £42,000 car? You’re still paying the supplement. Buy it second-hand three years later? If it cost over £40,000 when new, you’ll pay the supplement for the remaining years of that five-year window.
Should You Buy Before April 2025 to Keep the Exemption?
If you were planning to buy an EV anyway and the timing works, registering before April 2025 saves you £190 per year indefinitely. Keep the car for ten years and that’s £1,900 saved, or £2,900 if you avoid the expensive car supplement for five of those years.
But rushing to buy a car to save £190 annually rarely makes financial sense, particularly in a market that’s moving as quickly as EVs. Prices have fallen substantially over the past 18 months as supply has improved and manufacturers have introduced cheaper models. A Tesla Model Y cost over £50,000 in early 2023; by late 2024 you could find one for under £40,000 before the price increased again in early 2025.
Battery technology is improving, charging infrastructure is expanding, and more affordable models are arriving throughout 2025 and 2026. Waiting might mean you get a better car, with longer range and faster charging, for several thousand pounds less. That saving would take a decade or more of VED payments to offset.
If you’re currently happy with your existing car and were planning to wait another year or two, don’t let the VED change rush you. The tax is irritating, but it’s not transformative to EV running costs.
What This Means for Monthly Budgeting
For most EV buyers, electricity remains dramatically cheaper than petrol. Someone driving 10,000 miles per year in a reasonably efficient EV, charging mostly at home on a cheap overnight tariff, might spend £300 to £400 annually on electricity. The equivalent petrol car doing 45mpg would cost around £1,500 in fuel at current prices.
Adding £190 in VED takes your annual EV running costs to roughly £500 to £600, still less than half what you’d spend on petrol alone. If your car costs over £40,000, those five years of £600 annual VED are more noticeable, bringing your total running costs (electricity plus tax) to around £900 to £1,000 per year. That’s still cheaper than fuelling a petrol car, though the gap narrows considerably.
The VED change matters more as a psychological shift than a financial one. Part of the appeal of EVs has been their exemption from various taxes and charges. Losing that feels like the incentives are being withdrawn, even though the fundamental running cost advantage remains.
One Practical Tip: Check the List Price Carefully
If you’re buying new and the car you want sits close to £40,000, scrutinise the list price before you finalise the spec. Sometimes a single option pack or paint colour tips you over the threshold. Metallic paint might add £750 to the purchase price but cost you an extra £2,050 in VED over five years (that’s £410 per year times five). A larger battery that pushes the price from £39,500 to £41,000 costs you £1,500 upfront and £2,050 in tax.
Equally, don’t compromise on a car that doesn’t meet your needs just to stay under £40,000. Buying the wrong car to save £2,050 over five years is a false economy. But if you’re genuinely undecided between similar specifications, the VED implications are worth factoring in.