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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

Road tax, or Vehicle Excise Duty (VED) as it’s officially known, is part and parcel of car ownership in the UK. The system currently in use is based on carbon dioxide (CO2) emissions, so in short, the more your car pollutes, the more you have to pay to use it on the road.

By and large, that’s good news for electric-car drivers. If you own an electric car, you still need to apply for annual exemption, but as these models have zero tailpipe emissions, there's nothing to pay. 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 6 April 2020

All new cars are subject to a first-year 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 £150 a year, applicable for five years from the second time the vehicle is taxed. That’s between £5 and £10 more than for cars registered before 6 April 2020.

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 £140. And from 6 April 2020, all pure-electric vehicles are exempt from road tax – no matter their original list price. 

Road tax for vehicles registered between 1 April 2017 and 5 April 2020

Before April 2017, any car emitting less than 100g/km CO2 was exempt from VED. Thanks to improvements in fuel economy and reductions in tailpipe emissions, an increasing number of new cars were becoming tax-exempt, which didn’t bode well for HM Treasury's coffers.

So the Department for Transport introduced new rates. After 1 April 2017, only pure-electric and hydrogen fuel-cell vehicles were completely tax-exempt; owners of hybrids registered since that date have to pay road tax. Hybrid (including mild-hybrid) and plug-in hybrid cars are eligible for a meagre £10 discount (£130) on the price paid for conventional petrol and diesel models (£140).

There was, however, another catch with those VED rates. The owner of a car with an original list price that exceeded £40,000 had to pay an extra £310 a year the first five times they taxed their car. That means a fee of up to £450 (£310 + £140) for conventional vehicles, and £440 for most hybrids. In 2020, this requirement was changed, however, so any fully electric car registered on or after 1 April 2017 is now fully tax-exempt, regardless of its 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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