From April 2025, battery electric vehicles will no longer be exempt from Vehicle Excise Duty (VED), the tax most people still call road tax. If you own an EV or you’re in the middle of deciding whether to lease or buy one, here’s exactly what you’ll pay and when.
The basic numbers: what you’ll actually pay
\p>For new EVs registered from 1 April 2025 onwards, you’ll pay £10 in the first year (the showroom tax), then the standard rate of £195 per year from the second year onwards. That’s about £16.25 a month, or roughly what you’d spend on two decent coffees.
EVs registered before April 2025 remain exempt until 1 April 2025, then join everyone else at £195 per year from that point. So if you bought a Model Y in January 2024, you’ll start paying £195 annual VED from April 2025, regardless of when your registration anniversary falls.
The expensive car supplement: where it gets complicated
\p>This is 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, but only for years two to six of the vehicle’s life. The government calls this the “expensive car supplement”, though at current new car prices, £40,000 barely gets you into a mid-spec family SUV.
In practical terms, that means £620 per year (or about £52 per month) for five years if you bought something like a Tesla Model Y Long Range (£51,990 list price), a Skoda Enyaq 85 (£45,575), or a Volkswagen ID.4 with a few options ticked (easily over £40,000). Then it drops back to £195 annually from year seven onwards.
The supplement applies to the original list price, not what you actually paid. Negotiated a healthy discount? Bought it nearly new? Doesn’t matter. If the manufacturer’s list price when the car was new topped £40,000, you’re paying the supplement.
How this compares to petrol and diesel equivalents
\p>The standard rate of £195 applies equally to petrol, diesel, and electric vehicles registered from April 2017 onwards (assuming they’re not in the expensive car bracket). A Volkswagen Golf petrol and a Volkswagen ID.3 will both pay £195 annually, assuming neither cost over £40,000 when new.
Where EVs still come out ahead is in the first year. New petrol and diesel cars pay first-year VED based on CO2 emissions, which ranges from £10 for the very cleanest hybrids up to £2,745 for anything emitting over 255g/km. A BMW X5 diesel, for example, will set you back over £2,000 in year one alone. EVs pay just £10.
Does this change the lease versus buy calculation?
\p>Not dramatically, but it’s worth factoring in. Most lease agreements include VED in the monthly price, so you won’t see a separate bill. The leasing company absorbs the cost and builds it into what you pay monthly. On a three-year lease for an Enyaq, you’re looking at roughly £815 in total VED costs (£10 first year, then £620 for years two and three). Split across 36 months, that’s about £23 per month baked into your lease price.
If you’re buying outright or on PCP, you’ll pay it yourself annually. The expensive car supplement for a £45,000 EV adds £3,125 to your total cost of ownership over five years. Not enough to derail a purchase decision on its own, but worth including in your spreadsheet alongside charging costs and company car tax.
When you actually pay it
\p>VED is due annually on your vehicle’s registration anniversary. You can pay in one lump sum (cheapest), or by monthly Direct Debit, which adds a 5% surcharge. That means the £195 standard rate becomes £205 if you spread it across the year, or the £620 rate (standard plus expensive supplement) becomes £651. Six-monthly payments are also available at a smaller surcharge.
You’ll get a reminder from the DVLA, though paper tax discs are long gone. Everything is digital now, and enforcement is automatic via number plate recognition.
What this means in practice
\p>If you’re buying a sensibly priced EV like a base-spec MG4 (£26,995) or Vauxhall Corsa Electric (£31,895), you’ll pay £10 in year one and £195 annually thereafter. Simple.
If you’re looking at something more lavish, budget for £620 per year for five years after purchase, then £195 from year seven. On a salary sacrifice lease that includes VED, this is already factored into your monthly cost. If you’re buying privately, set up that Direct Debit and add £52 per month to your mental running costs tally.
The VED exemption was a nice bonus while it lasted, but at £195 annually, road tax still isn’t the expensive bit of running an EV. For context, that’s less than two months of the average UK car insurance premium. If an extra £16 per month changes your EV decision, you were probably stretching your budget too far anyway.