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Electric car road tax explained

Are electric and hybrid cars exempt from road tax in the UK? Here's how the current system works

Road tax

If you own a car in the UK, then you'll need to know about road tax – formally named Vehicle Excise Duty (VED). The amount you pay is currently based on how much carbon dioxide (CO2) your car produces, meaning the more your car pollutes, the more you have to pay to use it on the road.

But in another bonus for electric-car drivers, zero-emissions vehicles are currenly 'zero rated' for road tax, so you pay nothing. Plug-in hybrid (PHEV) drivers aren’t so lucky; even if you spend most of your time running around on electric power, you pay a flat rate of £140 a year. That’s the simplified version – but make sure to read on for all you need to know about road tax and taxing your hybrid or electric vehicle.

Road tax bands (VED rates)

On 1 April 2017, the Department for Transport (DfT) overhauled the UK’s road-tax system, bringing in higher rates for more polluting and more expensive vehicles, and making it tougher for drivers of low-CO2 cars to avoid tax. However, there are some exceptions and reductions, applying to both electric and hybrid cars.

The rules changed again on 6 April 2020. Before this date, electric vehicles costing more than £40,000 were liable for an annual road-tax charge the first five times the tax was renewed. But all electric cars are now exempt from VED, no matter their original list price.

Road tax for vehicles registered after 1 April 2017

All new cars are subject to a first-year road-tax payment, which varies depending on CO2 emissions. Thankfully, this initial fee is usually included in the car’s ‘on-the-road’ price – so you won’t get hit with a big bill moments before you leave the showroom.

After that, petrol and diesel cars costing less than £40,000 are subject to a flat VED rate of £155 a year, applicable from the second time the vehicle is taxed. Mild-hybrid, hybrid and plug-in hybrid models are classed as ‘Alternative Fuel Cars’ and get a £10 discount on that rate, equating to an annual fee of £145 for sub-£40,000 cars.

Those running petrol, diesel or hybrid cars with an original list price of more than £40,000 have to pay an extra £335 a year the first five times it's taxed. That means a fee of £490 (£335 + £155) for conventionally fuelled vehicles and £480 (£335 + 145) for hybrids (including plug-ins).

Pure-electric vehicles are currently exempt from road tax – no matter their original list price.

Road tax for vehicles registered between 1 March 2001 and 31 March 2017

Cars registered between 1 March 2001 and 31 March 2017 fall under a different tax system again, which heavily favours electric vehicles and hybrids. Crucially, there are also no flat fees, with owners of cars that pollute less paying little every year. If you’re looking at used electric or hybrid cars, it’s worth checking whether they were first registered before 31 March 2017, as these cars are fully tax-exempt, as long as they emit less than 100g/km of CO2.

Will electric-car owners have to pay road tax in the future?

While pure-electric cars are currently road-tax-exempt, this favourable situation is unlikely to continue indefinitely. For one thing, as the proportion of car sales taken by pure-electric models rises, the government loses more and more in fuel duty. Currently, the government makes around £28 billion a year from the 58p per litre of fuel duty that's added to petrol and diesel.

To make up for the shortfall in the future, several proposals have already been made. One is to introduce road pricing, where drivers will be charged for the miles they cover. As cars become more connected, where they're able to communicate with one other and roadside infrastructure, one of the ideas that has been mooted by think tanks is to charge owners a fee for each mile driven. Although the Government has taken no official stance on this yet, it has said that it’s investigating alternatives for fuel duty in the future.

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