Owning a car comes with many costs after purchasing the car itself. Road tax is one of the parts of vehicle ownership that people don't always like to pay, especially when it increases annually and luxury cars can require a higher payment.
With rising costs it makes sense that drivers are looking at ways to reduce the amount that they spend on their car, and road tax is now something that has multiple options that can be considered depending on the car that you
Fully electric cars and plug in hybrid vehicles are now readily available with a lot of benefits for car owners, including being an alternative to rising vehicle excise duty (VED) costs.
Road tax, or vehicle excise duty, is calculated based on the amount of CO2 emissions that a car releases. An electric car has an advantage over traditional petrol or diesel cars straight away in this area as they are zero emission vehicles.
For their first year, diesel and petrol cars registered after April 2017 are currently charged anywhere between £10 to £2365 depending on the CO2 emissions of your chosen vehicle. From its second year onwards, it's a flat rate of £165 a year (as of April 2022), although there is a premium rate for cars with a list price of over £40,000 which is payable for 5 years.
The cost of road tax tends to increase every year, with many drivers unhappy with another rising cost for their car.
Where do full battery electric vehicles fit into this and do they need to pay road tax?
As fully electric vehicles have zero emissions, they currently qualify for zero road tax. This now includes cars over £40,000, so luxury electric cars are no longer affected, and gives electric cars a considerable benefit over conventionally fuelled vehicles where you have an additional cost when you purchase your car for 5 years.
Whilst road tax on electric cars is free, you still have to do the application through the DVLA so that the car shows as being taxed. You go through the process as you would for a petrol or diesel car just with no payment to be made. Failure to do this can result in a fine of up to £1000 so make sure not to forget!
Fully electric cars are currently the only cars that currently don't have a cost attached to paying road tax.
Plug in hybrid cars are not exempt as they still produce emissions so do still require payment when applying for road tax. However, the vehicle tax is at a reduced rate compared to generic petrol and diesel cars as they are partially powered by an electric battery and therefore have lower emissions.
The full tax exemption for electric cars was only introduced in 2020 as an incentive for buyers considering a switch to electric cars. This is currently confirmed to be in place until 31st March 2025. After that it's unknown if electric cars will begin to be charged for tax like other vehicles.
With the UK Government banning the sale of new petrol and diesel cars in 2030 it's unknown if the road tax exemption will continue, especially as it is only confirmed until 2025.
The DVLA claim that they currently collect around £7 billion a year from people who pay road tax, which would be a substantial loss as the number of electric cars increase. Whilst it could be that electric car road tax may become payable as a replacement, there's been no official confirmation yet so it's nothing that electric car owners need to worry about at the moment.
Electric vehicles have always offered a financial benefit in that they are cheaper to run than diesel and petrol cars, but also offer additional benefits like having no cost when registering for road tax. This can make a huge difference when buying a car from brand new, as some models can have a first year road tax up to £2365.
The luxury car tax premium has also been scrapped for any electric vehicle over £40,000 which makes it a more feasible choice when comparing between electric vehicles and conventionally fuelled vehicles in the same price range. Hybrid cars give another option with a reduced cost for road tax.
Whilst these tax incentives are in place, it's definitely a good time to consider the switch to electric vehicles and take advantage of not having to pay road tax.