Last updated January 20, 2022
Road tax, which is officially known as Vehicle Exercise Duty (VED), is calculated based on the amount of CO2 emissions that are produced. As electric cars produce zero emissions, they are exempt from VED, providing the cost of the car doesn’t exceed £40,000. You can get a free car valuation in less than 30 seconds if you’re thinking of making the switch to electric ahead of the 2030 petrol and diesel ban.
The amount of tax you will pay for an EV will depend on several factors and the category the car falls into.
BEVs are fully electric cars that don’t produce any emissions and are therefore exempt from road tax for their entire lifetime.
Unlike BEVs, plug-in hybrid vehicles aren’t exempt from road tax as they still produce some CO2 emissions from their combustion engine. Most PHEVs on the market are likely to cost between £0 and £105 for the first year and £145 per year thereafter.
All vehicles with a list price of over £40,000 have a premium tax rate applied, which will need to be paid in addition to any standard road tax for the first five years after a vehicle is registered. The only cars that are exempt from the premium tax are those that produce zero emissions (BEVs).
Electric cars also carry cost saving benefits for business drivers. There was previously no tax on Benefit in Kind (BIK) for hybrid vehicles with emissions from 1-50g/km and fully electrics with a range of over 130 miles for the moment. However, this changed for 2021/22 where it increased to 1% and it is set to rise again to 2% for 2022/2023.
There are many other benefits to purchasing and owning an electric vehicle on top of the car tax exemption. Firstly, the government currently offers a range of grants and incentives for those buying an electric car, which can result in the purchase price and the cost of electric chargers being reduced. Some dealerships may even offer free home charger installation when you purchase an EV.
The running costs of electric cars are so much lower than the petrol alternative, with an electric car costing an average of £1.30 for 100 miles compared to £11.05 for a petrol car. Costs will differ depending on your home electricity tariff or where you choose to charge the car but will generally always be cheaper. If range anxiety is a worry, the range of electric cars is constantly improving, with the longest-range electric car on sale in the UK able to travel 405 miles on a single charge.
If you are worried about the environmental impact of combustion vehicles, one of the biggest advantages of electric cars is that they don’t emit harmful gases into the air, especially in congested cities where the government is aiming to improve air quality. There are also several low emission zones across the UK, with electric cars exempt from costs incurred by driving in particular areas.