Electric car drivers to pay road tax from 2025

Autumn Statement 2022 brings road tax changes for EV drivers

Chancellor Jeremy Hunt has announced his budget in the government’s Autumn Statement and there are changes afoot for electric car drivers.

One of the biggest changes announced will see electric car drivers pay Vehicle Excise Duty (VED, also known as road tax) from 2025 and beyond.

Electric cars are currently exempt from road tax due to their zero emissions, in what has previously been one of the biggest areas to make savings when taking out an electric car lease.

Eager to maintain a tempting incentive for prospective EV drivers, the government have remained committed to giving drivers a reason to make the switch out of their combustion engine cars.

As of April 1, 2025, all newly-registered EVs – and those currently registered – will have to pay just £10 for the first year. Based on emission output of 1 to 50g/km, this is the lowest bracket of road tax currently available.

From year two, the cars will then have to pay £165 a year in road tax. The decision to increase road tax on electric cars will result in additional revenue for the government.

Company car scheme updates

Elsewhere, there was good news for businesses who currently operate a company car scheme. After previous uncertainty, it has been confirmed that tax rate increases will be limited to 1% a year for three years from 2025.

The lack of clarity in recent years has resulted in some concern from businesses who were left unsure about the cost implications that future tax hikes might bring.

From 2025, Benefit in Kind tax (BIK) will increase from 2% to 3% and then another 1% the following year until it hits 5% in April 2028.

The government has recognised the need to continue incentivising the long-term uptake of electric vehicles among businesses and the stability provided by the Autumn Statement gives companies the chance to explore their company car options with confidence. 

There were also no further changes made to the 5p per litre cuts to fuel duty that were previously implemented by Rishi Sunak during his Spring Statement earlier this year.