Guide to Road Tax for Hybrid & Electric Cars 2023

Every car needs to be taxed. But not every car needs to pay road tax. The official name of road tax is Vehicle Excise Duty, and it’s mostly calculated on the amount of CO2 your vehicle emits. That means that low-emission cars pay less. It’s that simple.

Explore below to learn about which cars are exempt, how it works and more. Or contact your local Pentagon Group dealership for a chat with our hybrid and electric specialists.

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Zero-emission cars, vans and motorcycles will have to pay Vehicle Excise Duty (road tax) from 2025.

The government announced in November 2022 that electric cars will have to pay road tax from 2025, just five years before the UK bans the sale of new petrol and diesel engine cars in 2030.

What’s changed?

Zero-emission cars registered on or after 01/04/2017 will pay the lowest first-year rate of £10, the same rate that applies to vehicles with CO2 emissions from 1 to 50g/km.

After the second year of registration, electric cars will have to pay the standard yearly rate of £165.

EVs will also no longer be exempt from the Expensive Car Supplement. All new zero-emission cars registered on or after 01/04/2025 will have to pay this supplement if the list price was over £40,000.

Eligible cars have to pay £335 annually from years two to six.

And why?

VED exemption was an initial benefit that was promoted to increase the uptake of electric cars. As more and more drivers choose EVs over traditional ICE models, the government needs to find a way of retaining tax income from drivers.

So road tax exemption was only ever a short-term plan. Fuel is also heavily taxed so there will most likely be a new system coming into play over the next decade. But there are no concrete plans here so we just have to wait and see.

No. Currently, fully electric cars don’t pay any road tax. Road tax is calculated on CO2 emissions. As EVs don’t produce tailpipe emissions, they don’t have to pay road tax.

But you still do need to get your car taxed to drive it legally, so don’t forget.

Most cars have to pay the first year tax and then all following years, but with an electric car, you never have to pay. Whilst the EV road tax exemption isn’t planned to change soon, there may be some updates on how this works in the future as combustion engines are phased out.

There have been a few changes to the way road tax is calculated over the years. The most recent change affects all hybrid cars. Since 2017, VED has been based on CO2 emissions and car price, but before 2017 it was based on CO2 emissions and fuel type. Explore below to find out the road tax on hybrid cars.

You’ll typically pay less road tax for hybrid cars, but it’s not as simple as it is for full EVs. PHEVs and full hybrids pay anywhere between £0-£135 every year, depending on emissions.

Low emission hybrid cars will pay a reduced rate in the first year but then will have to pay increasing amounts after that.

The current road tax rates for hybrid cars are:

First year

• 0g/km - £0
• 1-50g/km - £0
• 51-75g/km - £15
• 76-90g/km - £105
• 91-100g/km £130
• 101-110g/km £150

Second year

• 0g/km - £0
• 1-50g/km - £145
• 51-75g/km - £145
• 76-90g/km - £145
• 91-100g/km £145
• 101-110g/km £145

There’s also another rate that applies to cars worth over £40k. So if your hybrid car was over £40,000 from new, you will pay an additional fee for five years from year 2. This applies to all hybrid cars, but not to fully electric cars.

The premium supplement for hybrid vehicles over £40k adds £335 to your annual road tax. After five years, the premium supplement is no longer paid. This is something to consider when searching for your next hybrid car from new.

This premium supplement is not applied to fully electric cars.

Vehicle Excise Duty for hybrid cars registered between 1 March 2001 and 31 March 2017 works slightly differently. Road tax for hybrid cars that fit in this band is worked out based on fuel type and CO2 emissions.

You don’t have to pay road tax if your hybrid car:

Was registered between 1 March 2001 and 31 March 2017
And produces under 100g/km

Hybrid cars pay a reduced rate compared to petrol and diesel cars. Explore annual costs below.

There are more tax benefits for electric cars than just not having to pay Vehicle Excise Duty. This includes not having to pay tax on petrol and diesel, congestion charge exemption among others.

One of the biggest costs that electric cars avoid is petrol and diesel. Fuel is heavily taxed by the government so this is one of the main ways you save money.

One of the main ways employers benefit from supplying EVs as company cars is by paying less NICs. This makes electric cars an even cheaper option for your company.

Businesses can also deduct the full price of a new electric car from their profits by claiming capital allowance.

If you can prove your electric car is used only for business, then you may be able to claim back the VAT.

Electric car owners don’t need to pay road tax but this may, eventually, change. With the ban on producing purely petrol or diesel engines currently set for 2030 in the UK, the government is likely thinking of new ways to reintroduce road tax for vehicles.

This is something that has been recently discussed by the government as if nothing changes from now until 2040 there will be no tax revenue from cars.

So, to combat this the government are looking at new systems for taxation. Electric cars and vehicles with low emissions will eventually be charged to use the roads.

The Parliament’s Transport Committee said they want drivers to pay the same or less when it comes to VED and fuel duty with a special focus on ensuring vulnerable groups and rural areas are not hit hard by any changes.

There are no concrete plans on how this will work but they are currently working on it. But again, this is unlikely to be introduced for a while.

Information is correct at the time of writing.