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Electric car road tax explained

Are electric and hybrid cars exempt from road tax in the UK? It's not quite that simple – here's all you need to know

Road tax

Vehicle Excise Duty (VED) is something that all car owners need to know about in the UK. It’s a tax on car ownership partly based on emissions (CO2), which is intended to encourage efficient cars that don’t pollute as much. 

Along with many other things, there’s a bonus for electric-car drivers: they’re currently 'zero-rated' for road tax. This only applies to cars with no combustion engine at all: plug-in hybrid (PHEV) drivers still pay a flat rate of £140 a year. There’s a bit more to it than that, though, so read on to find out everything you need to know about taxing your hybrid or electric car.

Road tax bands (VED rates)

Since 1 April 2017, when the Department for Transport (DfT) last overhauled the UK’s road-tax system, there has been a flat rate for all types of cars. It made it tougher for drivers of low-CO2 cars to avoid tax, and added more tax to expensive cars (over £40,000) as well. Electric and hybrid cars were priorities in this revision, as you can see below.

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

Road tax for vehicles registered after 1 April 2017

All cars have an initial tax cost that can go all the way up to £2,245 for the most polluting models – but as this is included in the price you pay to buy the car, it’s not of much concern to you as a buyer.

After that, non-hybrid petrol and diesel cars costing less than £40,000 are subject to a flat VED rate of £155 a year from the second time the vehicle is taxed. Hybrid and plug-in hybrid models (and even some mild hybrids) are classed as ‘Alternative Fuel Cars’ and get a £10 discount on that rate, which means the annual fee for those models is £145 (for sub-£40,000 cars).

If your car costs more than £40,000 when new, then you have to pay an extra £335 a year, but only for 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. Do note that this means the cost of road tax is zero, not that you don’t have to tax the car. You still need to go online or phone the DVLA to tax your car, even though it costs £0.

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 previous tax system, which heavily favours electric vehicles and hybrids. Importantly, there are 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. The tax system scales up depending on the CO2 emissions, and while there aren’t that many hybrids that emit more than 100g/km, it’s only the most polluting models that have a significant tax cost.

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 another 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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