There are changes to electric vehicle (EV) taxation in the UK from April 2025 that’ll have important implications for business owners. Let’s have a look at what’s changing and what it could mean…

The background – the end of Tax-Free Evs

Electric vehicle owners have been exempt from paying Vehicle Excise Duty (VED), commonly known as road tax. This has been a key incentive for individuals and businesses to adopt EVs, supporting the Government’s push towards greener transportation.

However, as the 2030 ban on new petrol and diesel car sales approaches, the Treasury faces a potential £8 billion annual shortfall in VED revenue. To address this and ensure a fair contribution from all road users, the Government decided to end the tax-free status of EVs from April 2025.

Key changes in EV Taxation from April 2025

1 New VED Rates for EVs

From 1 April 2025, EV owners will need to pay VED, with rates varying based on the vehicle’s registration date:

New EVs registered from 1 April 2025:

• First year: £10 (lowest band)
• Second year onwards: £195 (standard rate)

EVs registered between 1 April 2017 and 31 March 2025:

• £195 annually (standard rate)

EVs registered between 1 March 2001 and 31 March 2017:

• £20 annually

2 Expensive Car Supplement

The ‘Expensive Car Supplement’ will also apply to EVs from April 2025:

• EVs with a list price over £40,000 will incur an additional £355 annually for five years, starting from the second year of registration.

Changes for Electric Vans

Electric van owners will also be required to pay VED from 1 April 2025, with most e-vans moving into the same light goods vehicle classification as their petrol and diesel counterparts, attracting a charge of £335 per year.

The impact on businesses

These changes will significantly affect businesses operating EV fleets or considering transitioning to electric vehicles. While EVs will no longer be tax-free though, they still offer lower running costs compared to traditional vehicles.

Practical steps for business owners

1. Review Your Fleet Strategy: Assess your current and planned vehicle fleet in light of these tax changes. Consider the total cost of ownership, including the new tax rates, when making decisions about vehicle acquisitions.
2. Budget for Increased Costs: Factor in the new VED rates for your existing and future EVs in your financial planning for 2025 and beyond.
3. Explore Alternative Incentives: While VED exemption is ending, other incentives for EVs remain. Research and take advantage of any available grants, lower benefit-in-kind rates for company cars, and potential savings on fuel costs.
4. Consider Timing of Vehicle Purchases: If you’re planning to add EVs to your fleet, consider the timing. Vehicles registered before 1 April 2025 will be subject to slightly different tax rules than those registered after.
5. Stay Informed: Keep abreast of any further announcements or changes to EV taxation. The government may introduce new incentives or modify existing ones as we approach 2030.

Looking ahead…

While the introduction of VED for EVs marks the end of their tax-free status, electric vehicles still offer significant benefits for businesses. Lower running costs, reduced emissions, and potential future incentives make them a compelling choice for many companies.

If you’d like to talk through how these tax changes might affect your choice of vehicle, please get in touch. We’ll happily chat through your options and help you make an informed decision.