Changes to Vehicle Excise Duty and the Luxury Car Tax for electric cars

Electric car (EV) customers need to be aware of two important changes to Vehicle Excise Duty (VED) – more commonly known as road tax – which came into effect from 1st April 2025.

A change in standard VED

Electric cars have been exempt from VED, but from April 2025 they are now subject to what the government calls the standard annual rate for certain petrol/diesel cars of £195 from year 2 onwards. The first-year tax of £10 will be included in a customer’s rental.

EVs that have already been delivered through Fleet Alliance may be charged the standard annual VED rate from April this year when it falls due. Where applicable, the vehicle funder will invoice the £195 for each separate vehicle in a customer’s fleet.

The Expensive Car Supplement – how it affects EVs

Until now EVs have been exempt from the Expensive Car Supplement, also known as the Luxury Car Tax, unlike petrol and diesel cars. However, from 1st April 2025 all new EVs registered with a list price in excess of £40,000 will be subject to the Expensive Car Supplement. This is currently priced at £425 per year and runs from year 2 to year 6 of the car’s life.

In cases where the list price of the EV is below the £40,000 starting rate of the Expensive Car Supplement, but optional extras increase the value beyond £40,000, then the Expensive Car Supplement will apply.

EVs registered before 1st April 2025 will not be subject to the Expensive Car Supplement but will still be liable for the new VED rates, which could result in a sizeable increase in operating costs for larger fleets.

To discuss if these changes affect vehicles on your fleet, speak to a Fleet Alliance representative on 0345 601 8407.