So, sit back and relax, because we’ll cover everything you need to know in this expert guide on vehicle excise duty for EVs and hybrids. We’ll discuss the following:

  • Do electric cars pay road tax?
  • Do hybrid cars pay road tax?
  • How is road tax calculated?
  • Tax benefits of electric cars
  • Will EV road tax change in the future?
  • Best road tax-free electric cars
  • Road tax FAQS

Do electric cars pay road tax?

No. Since April 2020, you don’t have to pay vehicle tax on any zero emission vehicles, which includes electric cars. EVs don’t have to pay road tax in the first year or subsequent years, they’re exempt. It used to be the case that cars costing over £40k would have an additional charge, but this has now been scrapped for all electric vehicles as well. So, currently you won’t have to pay any road tax with an EV. But remember, you still have to get road tax for your electric car and fill in the documentation – it just won’t cost you anything.

Do hybrid cars pay road tax?

Are hybrids exempt from road tax too? No, unfortunately not. Hybrids, including plug-in hybrids (PHEVs), must still pay vehicle excise duty like petrol and diesel cars. However, with lower CO2 emissions comes a lower tax rate, so hybrids can still save you money in road tax.

How is road tax calculated on Electric Vehicles?

For all vehicle types, road tax is initially calculated using your car’s CO2 emissions. The higher the emissions, the higher the tax rate. It’s split into 2 payments, the first-year rate, which is based on the emissions, followed by a set standard rate from then on out.

Buying an electric car certainly saves you money on vehicle tax, because you currently don’t have to pay the standard rate or anything for the first year (as it has 0g/km CO2 emissions). You can see how much you’d save in vehicle excise duty in the example tables below:

First-year tax rate (when you register the car)

CO2 emissions Hybrid cars Petrol cars and RDE2 standard diesel cars
0g/km £0 £0
1-50g/km £0 £10
51-75g/km £15 £25
76-90g/km £105 £115
91-100g/km £130 £140
101-110g/km £150 £160
111-130g/km £170 £180
131-150g/km £210 £220
151-170g/km £545 £555
171-190g/km £885 £895
191-225g/km £1,335 £1,345
226-255g/km £1,900 £1,910
Over 255g/km £2,235 £2,245

 

Standard rate tax payments after the first year

Fuel type Single 12-month payment
Electric £0
Hybrids £145
Petrol / diesels £155

 

Premium rate

If a vehicle has a list price of more than £40,000 (before any discounts applied), you have to pay a premium rate charge as well. The additional fee is £335 and you pay it from the second year for a total of 5 years. However, as mentioned, electric vehicles are now exempt from the premium rate, so this only applies to petrol, diesel, and hybrid cars.

Fuel Duty

Included in the price you pay – fuel duty is an excise tax applied to the sale of diesel and petrol and other fuels (not electricity). As you can imagine, fuel duty is a significant source of revenue for HM Treasury. As drivers shift to electric cars and move away from fuel, in the future, it’s likely the government will introduce alternative tax measure to EVs to recover the tax yield reduction.

Road tax for Battery Electric Vehicles (BEVs)

As mentioned above, you don’t have to pay road tax for electric cars, aka battery electric vehicles. We’re saying it again because it’s another selling point for EVs that’s worth stating twice. Again, take note, you must still tax your vehicle – you just don’t have to pay anything to do it.

Road tax for Hybrids and Plug-in Hybrid Vehicles

Depending on the CO2 emissions (see the table above), the first year of road tax for plug-in hybrids and hybrids will typically cost drivers anywhere from £0 to around £105 – again, depending on their CO2 emissions. The following years for all hybrids will then be charged at the standard rate of £145 per year.

For example, if you bought a new, entry-level Toyota Prius hybrid you’d pay £130 for the first year of tax as this model produces 94g/km of CO2 emissions. The following tax payments would be at the standard rate of £145. If you bought the Prius PHEV model, you’d make more tax savings as its CO2 figures are only 28g/km – meaning it’d be free to tax in the first year.

Photo by Fernando Marques on Unsplash

Tax benefits of electric vehicles

Electric car tax benefits can help save money, making EVs a more enticing offer. And electric vehicles come with a number of tax incentives thanks to their zero CO2 emissions. The main benefits include:

1. Vehicle excise duty

Not having to pay vehicle excise duty is the first benefit of owning an electric car. But there are other benefits too. Read on to find out more.

2. EV Congestion charge exemptions

All fully-electric cars are exempt from the London Congestion Charge Zone and London’s Ultra Low Emission Zone (ULEZ). If you live in London, this point alone could save you thousands of pounds a year. Take note, however, this will only last until December 25, 2025 where upon the exemption will be dropped and EVs will be subject to the charges.

3. PI ID / Class IA national insurance

For businesses, employers pay less National Insurance Contributions (NICs) when they provide employees with electric vehicles and low-emission plug-in hybrids. Why? Because Class 1 NICs for company cars are calculated using official CO2 emissions.

4. Capital allowances on electric cars

Businesses can reclaim the full cost of one electric car as a capital allowance (see: gov.uk’s Capital Allowances). Furthermore, a business can claim grants for installing chargers through the Workplace Charging Scheme.

5. Government grants

For hybrids and EVs, the most significant grant to be aware of is the government’s plug-in car grant, which will provide up to £2,500 towards the cost of a plug-in vehicle costing less than £35,000. There are additional eligibility rules and criteria to meet, such as the vehicle having an electric range of at least 70 miles and combined CO2 emissions of 50g/km or less. That means the vast majority of electric cars meet this standard. However, only a few plug-in hybrid cars are actually eligible. For those that qualify, the grant is applied at the time of purchase, typically reduced as a discount from the starting price. Find out if you’re eligible for the low-emission plug-in grant at gov.uk.

6. VAT

For businesses, VAT is only recoverable on purchase if it can be proved that the electric car is solely available and used for business purposes. Note, this can be a difficult thing to demonstrate.

7. Workplace EV Charging Tax exemptions

Employers who provide charging points for electric cars and plug-in hybrids could be eligible to be made exempt from being taxed as a Benefit-in-Kind (BiK). As always, there are conditions and criteria that must be met, including:

  • There must be dedicated charge points installed
  • These must be available to all employees at the specific workplace
  • And the charge points must be at or located near the place of work

Best road tax-free electric cars

All electric cars are currently road tax free, which potentially makes any model the best if it meets your needs and requirements. Nonetheless, just for you we’ve made a little list of the longest range 10 best road tax-free EVs:

  1. Mercedes EQS 450+
  2. Tesla Model S
  3. BMW iX
  4. Ford Mustang Mach-E
  5. Tesla Model 3
  6. BMW i4
  7. Tesla Model X
  8. Volkswagen ID.3
  9. Polestar 2
  10. Cupra Born

If you want more information about these electric vehicles, head on over to our Top 10 Electric Cars with the Longest Range. And if EV range is a subject you’d like to delve into, check out our informative guide that covers all you need to know about Electric Car Range.

Frequently Asked Questions about Electric Car Tax

Here, we’ve compiled a host of electric and hybrid car tax FAQs. With direct answers, you’ll know all about VED in no time at all.

To wrap it up, fully-electric vehicles are currently exempt from paying road tax – aka vehicle excise duty (VED) – which is based on a car’s CO2 emissions. Hybrids still have to pay car tax, but often at a reduced rate (comparted to petrol and diesels) because of their lower emissions. In addition, EVs and Hybrids can also benefit from government grants and incentives, as well as a lower Benefit-in-Kind company car tax rate. These are all additional benefits of electric cars and hybrids that could save you money.

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And discover everything you need to know about EVs with our Electric Car Buying Guide.