A guide to Electric Car Tax

One of the main factors to think about when deciding to join the change and buying an electric car is the cost of running it. Thanks to support from the UK government, the cost of running an electric car is far less than the cost of running a petrol or diesel car in the UK. In this article we present why this is the case.

Getting ready for electric vehicles
Getting ready for electric vehicles

How much is fuel tax for electric cars?

Fuel duty on petrol and diesel is payed at a rate of 58 pence per litre. As electric cars use electricity to power the engine, rather than petrol of diesel, they do not pay fuel duty. So, by using an electric car, you are exempt from fuel tax, and only pay the price for electricity, which on average costs around 3 times less than the typical diesel engine.

The price of electricity happens to be cheaper than both petrol and diesel. And as the market for electrical vehicles is growing, they are going to become cheaper and we expect battery costs are going to fall.

On top of fuel duty, petrol and diesel used as fuel attracts the standard rate of 20% VAT. However, electricity that is used domestically in the UK attracts a reduced rate of 5%. This means that electricity that is used to recharge an electric vehicle at home also attracts the reduced VAT rate of 5%.

 

How much is road tax for electric cars?

The tax paid for all UK driving vehicles is called Vehicle Excise Duty (VED). The amount of tax is based on the CO2 emissions, so pure electric cars play absolutely nothing.

VED rates have recently been updated to make both diesel and petrol cars attract higher tax rates.

EV1

A petrol car with average carbon dioxide emissions (125 g/km in 2017), registered from 1 April 2018, will have to pay £165 for its first year, while a diesel car will have to pay £205 for its first year. After the first year, the VED is at a standard rate of £140 per year, although an electric car will still not have to pay VED.

It’s important to note that, although electric cars do not have to pay VED, all cars worth over £40,000 have a flat additional tax rate of £310 per year. That being said, you still pay less tax for electric cars than petrol and diesel.

Are electric cars cheaper?

To conclude, although electric cars are currently more expensive on purchase on average, the UK government subsidy of £5000 helps to bring it down, and the long-term savings with electrical vehicles means that it more cost efficient to use them.

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