VED Changes Coming to Electric Cars Guide in April 2025 - What Do You Need to Know?

Current Form

In its current form, the VED system uses various bands based on CO2 emissions. For example, historically, cars emitting zero emissions have either been placed in Band A or enjoyed an exemption altogether.

However, with the rising popularity of new electric cars in Britain, which is mainly driven by government incentives, the UK government is now updating the system to ensure that EV owners also contribute to the upkeep of British roads.

Get to Know the New Rules

So, whether you own a modern EV like an Audi Q4 e-tron, a new electric vehicle from other manufacturers such as Tesla or Volkswagen, or even if you’re eyeing something larger like an Electric Van - such as the Volkswagen ID Buzz , it really is key that you familiarise yourself with the details of these shifts to make sure you budget correctly.

For example, the bottom line is straightforward, if you plan to drive on UK roads, you must pay road tax no matter the car you decide to buy; but how much you will pay depends on a few factors, such as the type of fuel (or electricity) you use, the price of your car, its emission levels, and, of course, the year it’s registered - so lets find out more.

Updated Guidelines

EVs like the Audi e-tron, Q4 e-tron, and Q8 e-tron, for instance, have historically enjoyed free road tax - but this will soon change.

As part of the updated guidelines, EV owners will have to start paying an annual payment - after their first-year rate or from the second year - similar to what applies to new petrol or diesel cars.

This shift in the tax system aims to ensure fairness by having all road users contribute to the cost of maintaining and developing road infrastructure, irrespective of their fuel type.

Revenue Loss to the Exchequer

New technology can be expensive, and the government acknowledges the revenue loss once a significant percentage of the UK’s roads are dominated by electric or low-emission cars. As of January 2025, there are now 1,400,000 fully electric cars - making up around 5% of all cars on UK roads - meaning that a large enough percentage of UK cars are now electric but are not paying for the maintenance of the roads - making these changes start to bring a bit more equality between EVs, hybrid cars, and internal combustion engine vehicles when it comes to road tax.

While it might seem like a downside, it’s worth noting that the overall running costs of zero-emission vehicles still remain comparatively lower, thanks to cheaper energy prices compared to refueling petrol and diesel cars, fewer servicing requirements - due to fewer moving parts - and many other incentives as well.

Important for Your Budgeting

It’s a small step, but it is still important for your budgeting, especially if you plan to lease or purchase the vehicle outright.

If you are involved in a car leasing scheme, the lease company might also factor these costs into your monthly payments, giving you a one-off cost.

Consequently, It’s always a good idea to compare leasing deals carefully to see whether VED is included or if you must arrange that yourself.

Existing EVs (Registered Before 1 April 2025)

If you are one of the existing EV owners already enjoying life with a fully electric car that was registered before April 2025, you will not be charged any VED until April 2025.

However, from that point onwards, you will have to pay the same standard rate as other vehicles, which is currently set at £165 per year.

This will then make sures that all EVs, regardless of their purchase date, will eventually need to pay road tax.

Luxury Car Tax After 5 Years

This part of the policy was initially introduced to make sure that owners of more expensive cars pay a bit extra.

After five years, the VED rates then drop back to the standard annual rate.

So, if you’re considering a higher-end model from any brand you should be prepared for this additional annual payment.

BiK Rates

It is also an important factor to look into for company car drivers because while Benefit-in-Kind rates for zero-emission cars can be advantageous, road tax obligations for a higher-value vehicle can potentially offset some of those savings.

For example, if you are a business owner - or run a company car scheme - the changes to Benefit-in-Kind (BIK) rates are worth noting.

While BIK rates for EVs are rising slightly (from 2% to 3% in 2025), they are still significantly lower than petrol, diesel, or hybrid vehicles.

For instance, a high-emission company car can still easily attract a BIK rate of up to 37% - meaning thousands of pounds in extra tax from just not going electric.

So even with these changes switching to an EV could still save your business a small fortune, as a result.

Buying a New Vehicle

If you buy a new vehicle, the dealership or leasing company typically helps you with the initial VED payment.

For monthly payments and annual renewals, you can settle these through the Vehicle Licensing Agency's online portal or in Person at the Post Office.

For further official guidance, the government’s (gov.uk) website will give you detailed information on your first-year rates, standard annual rates, exemptions, or band reclassifications.

Consequently, you should always cross-reference your specific circumstances there to confirm you have the current rates for your individual circumstances as well.

Plug-in Hybrid Cars

Plug-in hybrid vehicles also often take the middle ground between zero emissions and standard combustion - particularly for short trips.

As a result, they can still be beneficial if you are not ready to go fully electric - especially if you are worried about charging infrastructure or frequently travel long distances.

However, keep in mind that the tax landscape is evolving, and long-term strategies around these might soon see further adjustments as more new electric vehicle options become available and the UK transitions away from fossil fuel use entirely.

Owners of Diesel Vehicles and Petrol Cars

At present, diesel vehicles and petrol cars continue to pay VED using the established band system based on CO2 output.

Although these changes will not necessarily increase the VED they pay, the aim is to balance out the previously free road tax that electric car owners enjoyed.

Diesel vehicles will still typically have higher emissions, and so they have often been in higher tax bands for the second year of registration and beyond.

However, new diesel cars have become more efficient, and the differences between the tax rate for some modern diesel or petrol cars and certain low-emission cars can sometimes be smaller than you would expect as a result.

How Much Will You Pay for an EV?

Below, we have put together a quick summary of what you can expect to pay for an EV after April 2025:

Should You Still Consider an EV?

Despite the looming changes to VED rules, choosing an EV for your next car can still offer many benefits:

Fuel Savings

Electricity is still generally cheaper than diesel or petrol.

As a result, in the long run, you will likely save on energy costs, even accounting for fluctuations in prices.

Lower Maintenance Costs

EVs have fewer moving parts, so you will typically spend less on servicing and repairs compared to a vehicle with a combustion engine.

Exemptions from Some Charges

While the Congestion Charge break for EVs in London only lasts until December 2025, there are still areas where you can escape other fees - or benefit from parking discounts that traditional ICE cars can not and need to pay.

Vehicle Excise Duty Rates from April 1, 2025

If you are curious how these bands break down, we have put together this handy table to help you.

How to Pay Your VED and Staying Legal?

Paying your VED on time is a legal requirement. Consequently, failure to do so can result in fines and penalties, such as those enforced by the Vehicle Licensing Agency.

So, whether you are driving the smallest engine size petrol car or a large EV, the principle is the same - you must remain correctly taxed and insured to drive on the roads.

When it comes to how and where to pay, you have several options, including, for instance:

Online Through Gov.uk Website

The most straightforward route is paying via the government’s official website, and you will need your vehicle’s registration and your V5C logbook reference number.

Is It Still Worth Buying an EV Before 2025?

One of the most common questions people ask is whether they should purchase a new EV, such as before 2025, to take advantage of the current VED rates.

The short answer is yes; it can still be worthwhile because even if you buy now and start paying from 2025, you get nearly two years of free road tax or at a reduced rate (depending on registration timing).

Plus, you’ll be driving a zero-emission vehicle that meets all current and upcoming emissions standards, and you might still benefit from local authority incentives until they update their own policies as well.

As well as that, many new EVs are improving significantly year on year, with better battery technology, longer ranges, and more efficient motors.

So, if you want to enjoy a cutting-edge driving experience, new electric cars from all major manufacturers can offer you that as well.

What About Electric Vans?

While this guide focuses primarily on EV cars, it is worth noting that Electric Vans are also becoming more common on UK roads.

Many tradespeople and companies are switching to electric vans to meet corporate sustainability goals or to save on the cost of diesel.

Just like passenger EV cars, electric vans will also need to pay VED from April 2025 if they were previously exempt.

So, if you are considering an electric commercial vehicle, you should double-check the rates for vans versus cars - as they can differ in some cases due to different classifications here.

Can I still drive in Clean Air Zones for free?

At least for the time being, you can, as many local authorities still offer free or reduced charges for zero emission vehicles, including plug-in hybrid cars, though these rules are subject to change as local councils adjust their policies.

Will these changes affect the Congestion Charge in London?

As of now, EVs remain exempt from the Congestion Charge until December 2025, and VED changes do not directly affect the Congestion Charge, but policies might shift in the future.

Are there any exceptions or rebates for EVs used in specific sectors, like emergency services?

Certain exemptions exist for specialist vehicles, but standard passenger EVs generally won’t qualify unless they have a specific classification or are part of an emergency fleet.

Changes to VED Costs for EV Vehicles Positives Outweigh the Negatives

Our goal with this guide is to provide you with an easy-to-understand explanation of the new VED rules, how the standard rate will affect different types of motor vehicles, how you might manage annual payments and monthly payments, and what you need to consider in the long term.

We also delved into relevant details about the first-year rate (often known as First-year tax), the second year of registration, and subsequent years of your vehicle tax obligations.

From explaining changes to VED costs for Audi and EV cars in general specifically to exploring the bigger picture involving diesel vehicles, the Congestion Charge, and even the Post Office payment methods for vehicle licensing, we have you covered.

As a result, we hope that by the end of this guide, you will now have a solid understanding of all the key changes, including how the autumn budget and the latest news have shaped these new VED rules, what the smallest engine size means in different bands, and why classic car fans have little to worry about.

You have also seen how zero-emission cars, and others such as the Tesla Model Y or the Volkswagen ID range, compare to new petrol vehicles, new diesel vehicles, and plug-in hybrid options.

If you also have any further questions, our team is on hand to help you as well.

Who is Sinclair Group?

Here at the Sinclair Group, we are a prominent family-owned motor retailer based in South Wales with a rich history dating back to 1945. Founded by Bill Sinclair in Port Talbot, our company has grown significantly over the decades.

Today, we operate 25 dealerships representing 12 prestigious automotive brands, including new Audi cars, new BYD cars, new Mercedes-Benz cars, new Land Rover cars to name just some of our 12 car brands.

We also employ around 900 staff members, many of whom have been with the Group for over a decade, reflecting our dedication to our employee development and satisfaction as well.