What taxes apply to electric vehicles and when will new petrol and diesel cars be banned?

There is no electric vehicle equivalent of the fuel duty paid by drivers of petrol and diesel cars.

But on 1 April 2025, Vehicle Excise Duty became payable on EVs for the first time.

For new cars, the payment in the first year is GBP10, rising to the standard rate of GBP195 in the second year. Those registered between April 2017 and March 2025 pay GBP195 from the start.

Electric cars registered after that date and costing more than GBP40,000 are also subject to the "luxury car tax" of GBP425 per year. This is payable for five years from the second time the vehicle is taxed.

Ahead of the Budget, the Treasury has reportedly been weighing up whether to consult on a "pay-per-mile" tax on EVs from 2028[1].

The Telegraph reported that EV drivers could be charged 3p per mile, on top of other road taxes, amounting to an extra GBP12 on a journey from London to Edinburgh.

It is unclear how such a scheme would be enforced, with reports that motorists would pay according to their own estimate of how much they expected to drive.

The AA said the government needed to "tread carefully" to avoid slowing down the transition to EVs.

Ford said taxes on electric vehicles may put drivers off buying them at a time when demand has "lost momentum".

In London, drivers of electric vehicles will have to pay the congestion charge[2] from 2026.

References

1. ^ "pay-per-mile" tax on EVs from 2028 (www.bbc.co.uk)
2. ^ drivers of electric vehicles will have to pay the congestion charge (www.bbc.co.uk)