Time to read (approx): 6 minutes
Road tax, also known as Vehicle Excise Duty (VED), is a payment that must be made for any car that is registered in the UK and driven or kept on a public road [1]. As of April 2025, there have been increases in road tax charges, especially for electric vehicles (EVs). According to a survey led by GoCompare, over half of drivers (52%) said that they were unaware of the rise in road tax costs, which they estimated was a massive 21.2 million drivers were left in the dark about the changes [2].
Now the changes are in place, and most people will have adjusted to the new prices, we ask why have the changes been made?
What is road tax and how is it calculated?
Tax on vehicles was introduced in the UK in 1889 by the Customs and Inland Revenue Act 1888. By 1909, the tax was linked to the construction and maintenance of the roads through the Development and Road Improvement Funds Act 1909 [3]. It is a legal requirement for drivers to pay their road tax each year, the money is paid directly into the Government fund and is used for improvements such as road work and maintenance [3].
The amount of road tax that you pay depends on the car you drive and the type of fuel it uses. If a vehicle produces more emissions, more tax will need to be paid. For cars that are registered after 1st March 2001, the road tax is calculated by the vehicle’s CO2 (carbon dioxide, a colourless gas made of carbon and oxygen atoms) emissions, which can then be calculated and split into different bands, which range from A (cheapest) to M (most expensive). The bands are based on how much CO2 is emitted per kilometre (g/km), cars that were registered before 1st March 2001, tax is calculated by taking into consideration the engine size [4].
Altogether, the amount of road tax you pay will depend on the age of your vehicle, the type of fuel it uses, and the CO2 emissions or engine size. Checking road tax rates regularly, especially just before purchasing a new vehicle – these rates can be found here, Vehicle Tax Rates – Gov.UK [4].
What’s changed?
A major change that has taken effect is the introduction of road tax on EVs, losing the incentive to purchase them. According to a survey carried out by Close Brothers Motor Finance, one third of drivers were unaware of these changes and 33% of those people said that they would have reconsidered their purchase if they knew [5]. In addition to this, low emission vehicles (10g/km) will now be charged £20 per year, despite previously not paying anything at all [6].
Road tax exemption for electric vehicles comes to an end
A major change to take effect is the introduction of road tax on EVs, losing the incentive to purchase them. All electric cars, vans, and motorcycles must now pay road tax is used or parked on UK roads, the only exception being heavy goods vehicles over 3,500 kg which still remain exempt [7].
How much road tax will EV owners pay?
As of April 2025, EV owners will be charged road tax and the different charges vary depending on when you bought your car, how long you have had it and the list price of the vehicle. The first-year rate, applicable until 2029, will be £10. From second year onwards, the standard annual charge will increase to £195. In addition to this, vehicles with a list price of over £40,000 will incur a supplementary charge of £425.
According to a survey carried out by Close Brothers Motor Finance, one third of drivers were unaware of the changes and 33% of those people said they would have reconsidered their purchase if they knew [5].
As of April 2025, EV owners, for first-year road tax will pay £10 for the year until 2029. Thereafter, from year two, the standard rate of £195 per year is applied. If the car’s list price is over £40,000, an additional charge of £425 will be applied from year two to year six – this is called the expensive car supplement and will bring the grand total of extra charges to £620 for the years listed.
With the number of zero emission vehicles on the road increasing, former Chancellor Jeremy Hunt has said that these changes have been implemented to create a ‘fairer motoring tax system’[8]. The policies and charges aim to ensure that all motorists (except for Heavy Goods Vehicle drivers), are contributing to road maintenance and public finances [9].
Considering making the switch to EV, but want to know more about the new charges first? Read our blog, ‘Navigating Ev taxes’.
Why has road tax increased?
The incentive of free road tax played a major role in encouraging EV adoption, making the switch especially attractive. As a result, uptake surged rapidly. However, with EVs previously exempt from road tax, the Government faced a shortfall in funding – revenue that is essential for maintaining and improving the UK’s road infrastructure. To address this gap, EVs are now subject to road tax charges, ensuring that all vehicle owners contribute to the upkeep of the transport network.
Why has first-year road tax increased?
The increase in first-year rate road tax has been mostly driven by the UK Government’s strategy to cut emissions and tackle climate change. Vehicles with higher CO2 emissions have a significantly higher contribution to environmental damage, so the Government are using first-year rate to deter people from purchasing these vehicles.
By making high-polluting vehicles more expensive to tax, the policy is designed to encourage the uptake of cleaner alternatives, such as electric or low-emission hybrid models. Additionally, these increases help offset the environmental costs associated with higher-emission vehicles and align with the UK’s broader strategy to meet net-zero targets by 2050.
Why has standard rate road tax increased?
The standard rate of road tax has seen a modest increase due to inflation, and there has also been an incremental rise to standard rate road tax. While tax is no longer directly tied to emissions for most cars registered after April 2017, it helps fund the maintenance and development of the UK’s road network.
The increase also reflects a shift in public policy that aims to encourage long-term ownership of cleaner vehicles. As the Government faces a decline in revenue from fuel duty due to the rising number of low and zero-emission vehicles, raising the standard rate helps ensure a stable funding stream for transport and environmental initiatives.
As more drivers switch to EVs, maintaining their tax-exempt status would result in a significant revenue gap. Vehicle tax on EVs ensures all road users contribute to the public infrastructure while still keeping taxation of EVs cheaper than traditional cars. The change also reflects a maturing EV market where buyers no longer need financial incentives to consider cleaner transport options
Stay informed and plan ahead
Is your vehicle taxed? Use the Government website to check and avoid hefty fines.
With the recent increase in road tax for regular cars and the new charges for electric vehicles, plus the ongoing cost of living crisis squeezing household budgets, getting a comprehensive car warranty from Warrantywise can provide much-needed peace of mind against unexpected repair bills that could otherwise devastate your finances.
Sources
[3] What is car tax?