What are the changes to road tax for electric vehicles?
Here’s a breakdown of the new Vehicle Excise Duty rates for EVs (bearing in mind that the list prices shown include optional extras but does not account for retailer discounts):
- New EVs (registered from 1st April 2025) with a list price exceeding £40,000 – in addition to the standard £195, a £425 luxury car supplement will be payable annually from the 2nd to 6th year of ownership.
- New EVs (registered from 1st April 2025) with a list price of £40,000 or less – a reduced £10 first-year tax, followed by £195 per year thereafter.
- Existing EVs (registered before 31st March 2025) – annual road tax of £195.
Act now to save £195 on your EV road tax
To delay these new charges, renew your EV’s road tax before 31st March 2025. Doing so will extend your current £0 tax rate for another 12 months, postponing the £195 charge until later.
The benefit depends on when your vehicle’s current tax is due for renewal:
- If your renewal is due in April 2025, taxing your EV before 31st March 2025 allows you to delay the new charge for a full year, saving £195.
- If your renewal is in February 2025, you’ll only delay the charge by a couple of months.
While individual savings may seem small, businesses with multiple EVs could accumulate significant savings through this simple administrative step.
How to renew your electric vehicle road tax
To renew your road tax, you will need your vehicle’s log book (V5C).
You can complete the process online via the dedicated UK government website here: vehicletax.service.gov.uk.
This is a straightforward way for companies to save money. Businesses leasing large fleets should also ensure their leasing companies are following best practices and taking advantage of this opportunity.
Furthermore, we may start seeing EV list prices clustering below the £40,000 threshold to avoid the £425 annual luxury tax.
Electric vehicles are still a good option for company benefits
Despite these changes, benefit-in-kind (BiK) charges for EVs remain highly attractive compared to petrol and diesel vehicles, making salary sacrifice schemes a tax-efficient option.
Employers and employees should review their policies to ensure that these additional costs can be deducted from gross pay, helping to reduce PAYE and National Insurance contributions. In fact, over 50% of these extra costs could be offset by other tax savings with the right salary sacrifice scheme.
Further information and advice on road tax for your electric vehicle
You can find more information on Gov.uk here, however you can also contact our tax team for advice on your company car benefit queries. You can contact our Manchester office on 0161 905 1801 or our Warrington team on 01925 830 830, or email us to mail@lwaltd.com.
We also regularly write blogs with tax saving tips and employer advice so please visit our website or sign up to our monthly newsletters.