Top car leasing comparison experts at LeaseLoco admitted that updates to electric car tax were among one of the biggest updates to hit motorists in 2025.
They said: “Electric vehicles will lose their tax-free perk. From 1 April 2025, electric vehicles (EVs) will no longer be exempt from Vehicle Excise Duty (VED), marking a significant change for EV owners.
“Newly registered EVs will be subject to a £10 VED charge in the first year, increasing to £195 annually from the second year onwards.
“Additionally, EVs with a value exceeding £40,000 will incur an extra charge of £410 per year for five years under the expensive car supplement.”
The decision to introduce VED fees for electric vehicles was made back in 2022 with Labour introducing further measures in their Autumn Budget.
HM Revenue and Customs previously explained: “From 1 April 2025, registered keepers of electric, zero or low emission cars, vans and motorcycles will need to pay vehicle tax in the same way as registered keepers of petrol and diesel vehicles. This change will apply to both new and existing vehicles.
“This new measure removes band A under the existing VED system which is currently £0. Vehicles in this band will be required to move to the first band where a rate becomes payable.”
However, there are concerns the move to tax electric vehicles could backfire and have a hefty impact on demand for EVs.
Specialists at Plus Accounting said that industry experts argue that the £40,000 threshold does not reflect luxury for electric models.
This is because EVs are generally more expensive to purchase than many luxury petrol and diesel models.
Plus Accounting commented: “Extending the “expensive car supplement” to electric vehicles will significantly impact demand.”
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