Autumn Statement 2022: what it means for motorists

The Chancellor of the Exchequer announced today that electric cars will no longer be exempt from car tax (or Vehicle Excise Duty - VED) from April 2025. All existing electric vehicle (EV) owners will be affected.

In a similarly surprising move, the government has announced that rates for alternative fuel vehicles (such as hybrids) will be equalised, meaning hybrid owners will pay the same rates of car tax as petrol/diesel owners.

From 1 April 2025, owners of new electric cars will pay the lowest rate of tax, currently £10, in the first year of ownership (first-year rate), then £165 per year onwards (standard-rate).

Electric car owners will also no longer be exempt from the ‘luxury car tax’ (officially called the ‘expensive car supplement’), which currently sees owners of cars that cost over £40,000 pay an additional £355 per year, for five years.

The £355 is added to the standard rate, so based on today’s rates it would see EV owners pay £520 per year, for five years.

Based on a sample of 50 electric cars that you can buy brand new today, as tested by Which?, half currently have a starting price above £40,000.

Looking to buy a new car? Discover the best electric cars we’ve tested

What are the new car tax rates for electric car owners?

The amount of car tax will be dependent on the age of your electric car. Like today, there will be a first year rate, a standard rate, and an additional rate for cars that cost over £40,000.

First year rate: applies in the car’s first year of ownership. This is part of the car’s OTR (on-the-road) price and is based on official CO2 output.

Standard rate: applies from the second year onward and is a standard amount regardless of CO2. Hybrid owners did pay £10 less per year, but this is set to end too.

Expensive car supplement/luxury car tax: for cars that cost over £40,000 when new (including factory fit options), this adds as an additional rate to the standard rate, in year 2, 3, 4, 5 and 6 of ownership. The current rate is £355, so owners pay an additional £1,775 over five years in addition to the £165 per year standard rate.

Electric cars first registered on or after 1 April 2025

Electric cars first registered on or after 1 April 2025 will pay the lowest rate of tax (first year rate), which is currently £10.

From the second year onward, the standard rate kicks in and electric car owners will then need to pay £165 per year - the same rate that petrol and diesel owners pay today (if they have a car first registered after 1 April 2017).

If the electric car costs £40,000 or more when new, the expensive car supplement will be added to the standard rate, for five years.

As it adds to the standard rate, you will pay a supplementary rate during years 2-6 of ownership. Based on on today’s rates, that would mean electric car owners would pay an extra £355 on top of the standard rate of £165, to spend a total of £520 per year, for years 2-6 of ownership, before dropping back down to the standard rate of £165 from year 7 of ownership and on.

Electric cars first registered between 1 April 2017 and 31 March 2025

Electric car owners with a car first registered after 1 April 2017 will also pay £165 per year from April 2025 onwards.

The £40,000 expensive car supplement is not being backdated, so an electric car first registered in 2024, for example, should not have to pay the supplementary rate of £355 on top of the standard rate from April 2025.

Electric cars first registered between 1 March 2001 and 31 March 2017

Modern electric cars started coming to the mainstream market from around 2009-2010. But those who have an electric car registered before 31 March 2017 will be eligible to pay the ‘band b rate’, which is currently set at £20 per year.

Rates for all cars first registered between 1 March 2001 and 31 March 2017 are based on CO2 output and can increase with the Retail Prices Index (RPI).

You’ll find all the current car tax rates in our guide to car tax.

What about hybrid owners?

Owners of alternative-fuelled cars, which includes hybrids and LPG-powered cars, currently pay slightly less car tax than standard petrol and diesel car owners.

For cars registered after 1 April 2017, alternative-fuelled car owners pay £10 less per year in both the first year (first year rate) and from the second year onward (standard rate).

The current standard rate for alternative fuel/hybrid owners is £155, compared to £165 for petrol and diesel cars. The budget says this will be equalised, which means owners or hybrids and standard combustion petrol/diesel cars will pay the same rates.

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Will electric cars still be cheaper to run than non-electric cars?

Yes, particularly if you can charge from home. Though it has also been announced that energy prices will rise from April 2023, which will affect what electric car owners will need to pay.

The following calculations assume:

• Annual mileage of 8,100 (average consumer mileage as per our latest car survey).
• £165 per year in car tax for all fuel types - it is not clear whether petrol/diesel car owners will pay more than the current standard of £165 come April 2025, though it does seem likely.
• Standard home charging costs of 34p per kWh and this month’s average fuel prices of 165.96p per litre for petrol and 190.31 for diesel (RAC Fuel watch, 1 November 2022 prices).

A standard mid-size electric hatchback (i.e. a car the size of the Volkswagen ID.3) costs around £890 per year to charge at home.

The equivalent sized diesel car costs £1,251. So EV owners save £361 per year when looking at fuel costs alone. The £165 EV owners will need to  pay will reduce that saving to £196, but it is still a saving.

There are bigger savings when comparing against petrol cars. The same sized petrol car would cost £1,461 to fuel per year. So a saving of £571, reducing to £406 after paying £165 on car tax.

Those who are not paying a standard rate but making use of an off-peak rate when charging from home stand to save considerably more. But for those who cannot charge from home and are reliant on public chargers, it’s a different story.

What about if I charge using public chargers?

Sticking with a medium-sized hatchback, our current analysis shows that if you’re paying more than 46p per kWh for electricity, you’d end up paying more to charge your car with electricity than you would to run the same sized car on diesel. Paying 55p per kWh or more makes it more expensive than petrol. Some public chargers cost significantly more than this to use.

Charge rates for ‘rapid/ultra-rapid’ (DC) public chargers, the fastest way to charge your car, typically cost between 60-70p per kWh.

Taking 65p per kWh as an example, an electric car owner who uses only rapid chargers would pay approximately £1,700 per year to charge that same mid-sized electric hatchback, compared to the £890 at home on a standard rate. That's significantly more expensive than petrol/diesel before car tax for EVs is added.

While it's unlikely someone would use rapid chargers exclusively, when you are paying these high rates, you'll be paying more per mile than petrol/diesel car owners.

Find out more by heading to our guide on the cost of charging an electric car.