Electric Vehicles Will Pay Vehicle Excise Duty From April 2025 – Employee Benefits

Fall Budget 2022: The government has announced that electric cars, vans and motorcycles will be subject to Vehicle Excise Duty (VED) from April 2025.

According to Chancellor Jeremy Hunt, this will ensure a fairer tax contribution as the adoption of electric vehicles continues to accelerate. The government will legislate for this measure in the next autumn 2022 finance bill.

New zero-emission cars registered on or after April 1, 2025 will be required to pay the lowest first-year VED rate, which applies to vehicles with CO2 emissions between 1 and 50 g per kilometre, or £10 per year. From the second year of registration, they will switch to the standard rate, which is currently £165 per year. Zero-emission cars first registered between April 1, 2017 and March 31, 2025 will also pay the standard rate.

Zero and low-emission cars registered between 1 March 2001 and 30 March 2017 currently in Band A will change to the Band B rate, which is £20 a year, and zero-emission vans will change to the vehicle rate petrol and diesel light commercial vehicles, currently amounting to £290 a year.

Meanwhile, zero-emission motorcycles and tricycles will drop to the smallest engine size tariff, which is £22 a year, and tariffs for alternative fuel vehicles and hybrids will also be equalised.

In addition, the costly car surcharge exemption, which currently applies to cars with a list price of over £40,000 for five years, for electric vehicles is due to end in 2025, new zero-emission cars registered on 1 April 2025 or after being responsible.

Hunt said: “Going forward, the fairest way to restore public finances is to ask everyone to contribute a little. The tax system should continue to adapt to reflect consumer behavior. This will ensure that all motorists will start paying a fairer tax contribution.