From April 2027, electric car owners will start paying Vehicle Excise Duty (VED, or road tax) for the first time. If you’re budgeting for an EV, or already own one, here’s what the changes mean in actual pounds and pence.
What you’ll pay: the basic rate
Most electric car owners will pay the standard rate of VED, which is £195 per year at current rates. That works out to about £16.25 per month, or roughly the cost of two fancy coffees.
This applies from the second year of ownership onwards. In the first year, EVs will continue to pay nothing, so if you register a new electric car in March 2027, you won’t pay anything until April 2028.
The expensive car supplement: where it gets pricey
Here’s the bit that catches people out. If your EV had a list price over £40,000 when new, you’ll pay an additional £425 per year on top of the standard rate for five years, starting from the second year of registration.
That’s a total of £620 per year, or about £52 per month, for years two through six of the car’s life. From year seven onwards, you drop back down to the standard £195 annual rate.
The £40,000 threshold is based on the car’s original list price, including any factory-fitted options but before any discounts. So even if you negotiated a brilliant deal or bought the car second-hand for £25,000, if it was listed at £40,500 when new, you’re paying the supplement.
Worked examples with real cars
Let’s look at some popular models to see how this plays out in practice.
A MG4 SE with a list price of around £26,995 stays under the threshold. You’ll pay £195 per year from April 2028 onwards if you buy one now. Simple.
A Tesla Model 3 rear-wheel drive, with a list price of roughly £42,990, crosses the line. If you register one in 2026, you’ll pay nothing until April 2028, then £620 per year (£52 monthly) until April 2033, then £195 per year after that.
A Kia EV6 is interesting because it depends on the trim. The base Air model comes in under £40,000, but add the GT-Line trim and you’re over. That specification choice could cost you an extra £2,125 over five years.
How this compares to petrol and diesel
It’s worth noting that petrol and diesel cars already pay these rates. The expensive car supplement applies equally to a £45,000 Range Rover Evoque and a £45,000 Polestar 2. The change simply brings EVs into the existing system after years of exemption.
However, EVs still avoid the first-year VED rate, which for high-emission petrol and diesel cars can reach £2,745. That’s a genuine saving if you’re buying new.
Should you buy before or after April 2027?
If you’re planning to buy an EV with a list price over £40,000, buying before April 2027 doesn’t actually save you anything. You’ll still start paying VED from April 2027 regardless of when you registered the car, according to the current government guidance.
The only minor timing advantage is if you register a car in, say, February 2027. You’ll get that first year free, then start paying from February 2028 rather than April 2027. But we’re talking about a few months’ difference, not years of savings.
What might make more financial sense is choosing your trim level carefully. If you’re looking at a model that straddles the £40,000 line, dropping one specification tier could save you £2,125 over five years. That’s enough to pay for a home charger installation and still have change left over.
One thing to remember
These rates are based on current VED figures and could change before 2027 or in subsequent budgets. The government typically announces VED rates in the autumn Budget, and they tend to increase slightly each year in line with inflation.
When you’re comparing EV running costs against petrol or diesel, factor in about £195 to £620 per year for road tax from 2027 onwards, but check the latest rates when you’re actually ready to buy. And if you’re right on the edge of that £40,000 threshold, it’s worth getting the exact list price in writing from the dealer, options and all, before you commit.