The UK government will introduce vehicle excise duty (VED) charges for electric vehicles (EVs) from 1 April 2025, ending their longstanding tax exemption.
The move, first announced by the Conservative government in 2022 and reaffirmed in Labour’s 2024 Autumn Budget, will bring EV taxation in line with petrol and diesel vehicles.
From April 2025, new EVs registered on or after that date will incur a first-year tax rate of £10 before moving to the standard annual rate of £195 from the second year onwards.
Existing EVs registered between 1 April 2017 and 31 March 2025 will automatically transition to the £195 standard annual rate.
Older EVs registered between 1 March 2001 and 31 March 2017 will move into the first VED band with a payable rate, resulting in an annual tax of £20.
The changes will also affect hybrid and alternative fuel vehicles, with the government removing the £10 annual discount for these vehicles.
HM Revenue and Customs has stated that the changes are intended to ensure a ‘fairer tax contribution’ from all drivers, regardless of vehicle type.
The government argues that as EV adoption increases, taxation policies must evolve to maintain public revenue streams.
Concerns have been raised by the Association of Fleet Professionals (AFP) about a lack of awareness of these changes amongst fleet operators.
AFP director James Pestell explained: “The feedback we are receiving is that many fleets simply haven’t appreciated and accounted for these increases, which are substantial when applied across entire fleets operating dozens, hundreds, or thousands of EVs and plug-in hybrid electric vehicle (PHEVs).
“From April onwards, they’ll be receiving bills from the DVLA or shortfall invoices from their leasing supplier, and won’t have factored them into their running costs. That’s why we are flagging up this issue now.”
He added that taken together, the VED increases represent a major jump in costs for EVs: “Electric cars costing over £40,000 bought after the start of April – including some of the most common models on fleets – that would have attracted no tax in 2024-25 will be liable for £2,490 during the first five years of their life. That’s a big increase.”
Want to find out more about electric vehicles and alternative fuels? Make sure to come along to the panel discussion exploring this topic hosted by Logistics Manager’s sister publication CiTTi Magazine at the Sustainable Supply Chain Exhibition.
This event is co-located with IntraLogisteX and Robotics and Automation at the NEC Birmingham on 25-26 March 2025, and will offer a focused environment for logistics, supply chain and sustainability professionals to share ideas, offer solutions and help each other on their sustainability journeys.
Click here to register for free!
