In 2025, the UK will see significant changes to Vehicle Excise Duty (VED), affecting both traditional combustion engine vehicles and electric cars. These updates, driven by the government’s goal to recover revenue losses due to the shift toward electric vehicles (EVs), will mean that EV owners who have previously enjoyed VED exemptions will now face new annual charges. Starting from April 1, 2025, new EVs will incur a £10 tax in the first year, rising to £190 annually from the second year, which matches the standard VED rate currently applied to petrol and diesel vehicles.
[The Chancellor said the government will change VED first year rates to ‘strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars’]The new rules also introduce a “luxury car tax” on EVs priced over £40,000, adding an extra £390 per year for five years. This will impact buyers of higher-end EVs, adding a notable cost to ownership. This shift aims to close the income gap as VED exemptions and declining fuel duty revenue impact the government’s budget. While these changes will slightly reduce the financial incentives to purchase EVs, other perks, such as reduced Benefit-in-Kind (BiK) rates for company EVs, will still make them an attractive option for many buyers.
These adjustments underscore the UK’s strategy to balance incentives for greener choices with the need to maintain public revenue. For further details on these changes, you can explore sources like
