To fall back on a well-worn phrase, electric cars have been creating quite the buzz amongst UK drivers for the last couple of years, and now there are more of them on the roads than ever. Transitioning UK cars to electric vehicles is a major element of the government’s decarbonisation strategy, which is one reason why electric car drivers have enjoyed tax breaks over the last few years.

However, all that is changing as of April 2025. From the first of the month, electric cars are no longer exempt from Vehicle Excise Duty (VED), commonly known as road tax. The change applies to both new and existing EVs, and while the tax rates remain lower than those for petrol or diesel cars, it marks a significant shift in how electric vehicles are treated.

If you’ve got a petrol or diesel car and you’re thinking about switching to electric, we’d recommend giving the below a quick read-through before you scrap your car!

What’s been the situation so far?

Until now, fully electric vehicles in the UK have enjoyed complete exemption from road tax. As we’ve just touched upon, this exemption was introduced in 2010 to encourage the switch to cleaner, greener transport, helping to reduce carbon emissions and air pollution. And with EVs producing zero tailpipe emissions, it’s easy to see why they’ve been a key part of the government’s net-zero ambitions.

The tax-free status has also been a financial incentive, given that traditional petrol and diesel cars can incur hundreds of pounds in annual VED. For many drivers, this saving has been a deciding factor when weighing up the higher upfront cost of an EV compared to a combustion engine vehicle.

Beyond road tax, EV owners have also benefited from cheaper running costs. Electricity is less expensive than petrol or diesel, and EVs tend to have fewer moving parts, which often means lower servicing bills. In some cities, electric cars have also enjoyed further perks such as exemption from congestion charges, though access to these discounts has been tightened in recent years. All of this combined has made the idea of going electric not just greener, but easier on the wallet too.

What’s changing as of April?

From 1 April 2025, electric vehicle owners begin paying road tax, effectively bringing them in line with other vehicle types. Now, the exact amount of VED payable depends on the registration date and list price of the car, as well as its emissions – though all zero-emission vehicles will now have a bill to pay.

EVs first registered on (or after) 1 April 2025 pay a first-year rate of £10, which is the lowest band currently available and reflects their zero emissions. From the second year onwards, these vehicles will be subject to the standard annual rate, which is set to be £195 from April 2025. Meanwhile, owners of EVs registered between 1 April 2017 and 31 March 2025 will be paying the standard £195 rate annually from April 2025. Anyone with older EVs registered between 1 March 2001 and 30 March 2017 pay a reduced rate of just £20 per year.

And yes – plug-in hybrid vehicles are also affected. From April 2025, PHEVs are taxed at the same rate as conventional fuel vehicles; losing their existing £10 annual discount.

It’s worth noting, though, that the £195 rate may not remain static. As with other tax bands, it's expected to rise in line with inflation in future years. While electricity and servicing costs aren’t directly affected by the change, the introduction of VED is one more running cost that you may need to factor into your calculations.

What is the luxury car tax and why is it controversial?

The so-called Luxury Car Tax, officially known as the Expensive Car Supplement, is where things get more contentious. This charge applies to vehicles with a list price of £40,000 or more, adding £425 per year in VED from the second to the sixth year of registration.

While this tax was originally intended to target genuinely high-end luxury models, it’s now catching out a growing number of EV buyers. Thanks to the expensive batteries and technology that power them, many electric cars – even family-friendly models like the Kia Niro EV or Volkswagen ID.3 – are priced above the £40,000 threshold. In fact, the average price of a new EV in the UK is currently well above that line.

There’s a variety of reasons for that. Unlike traditional cars, where £40,000 might suggest a luxury trim or a premium badge, many electric vehicles cross that threshold due to standard items like longer-range batteries, modern infotainment systems, or advanced driver safety tech. As a result, cars that you wouldn’t necessarily associate with “luxury” are being hit by a charge that was never intended for them.

More frustrating still is the fact that the £40,000 threshold hasn’t been adjusted in line with inflation or market conditions. With prices rising across the board, it's now entirely possible for a mid-range electric hatchback to be penalised by a tax designed for executive saloons.

What has the government said?

Ministers are well aware of the criticism surrounding the Expensive Car Supplement and its disproportionate impact on EV buyers, and indeed, acknowledged the issue in the 2024 budget. To quote, “The government recognises the disproportionate impact of the current VED Expensive Car Supplement threshold for those purchasing zero emission cars and will consider raising the threshold for zero emission cars only at a future fiscal event, to make it easier to buy electric cars.”

For now, if you’re planning to buy a new EV, you may need to adjust your finances so that you can be sure you’re able to budget accordingly. If the list price exceeds £40,000 – even by a small amount – you can expect to pay an extra £425 a year for five years on top of the standard VED. That’s more than £2,000 in added cost across half a decade, and it applies regardless of whether the car is genuinely luxurious or simply equipped with a bigger battery.

However the EV market develops, one thing is for certain – we’ll always be here at EMR Vehicle Recycling to help you scrap your old car. With more than 70 years of experience to our name, and Authorised Treatment Facilities all over the UK, we have a proven track record of providing truly exemplary service. And of course, you can always expect the very best price!

It couldn’t be easier to get started. All you need to do is enter your car reg and postcode into the fields on our homepage, and you’ll have an instant online quote before you can say scrap my car. Curious to see how much your car could be worth?