What are the tax differences between electric and petrol cars?

If you’ve done any research on Electric Vehicles (EVs), you’ve probably found that EVs offer many advantages over petrol powered vehicles. What you may not have considered is that EV’s are taxed differently from conventional internal combustion driven vehicles.

While EV owners use the roads just as drivers of internal combustion engine driven cars, they’re taxed at a different rate. In recent years, the government has encouraged the use of EV’s by setting up a large range of tax rebates, credits, and incentives.

Vehicle Excise Duty

While we often refer to a road tax, that tax doesn’t really exist. What most people think of as road tax is actually the Vehicle Excise Duty (VED). Everyone that operates a vehicle in the UK is required to pay the VED. The VED is calculated according to the vehicle’s CO2 tailpipe emissions and the list price for any vehicles registered since March, 2001. For cars registered before 2001, the tax is calculated based on the size of the engine.

Zero emission vehicles are currently exempt from the VED, but that doesn’t mean that you won’t have to pay if you drive a zero emissions vehicle. If you purchase an EV, hybrid, or plug-in hybrid that costs in excess of £40,000 brand new (including options), you’ll owe an additional amount for the VED. If you purchase an EV under £40,000, you won’t have to pay the VED at all.

In addition to the tax break offered to EV drivers, if your regular gas or diesel vehicle was registered between March, 2001 and March, 2017, and the CO2 emissions are less that 100 g/km, you’re exempt from the VED.

EV Congestion Charges

Another type of tax sets up clear air zones, and to drive into these zones, you’re required to pay a fee. In London currently, this fee is £15 per day per vehicle, from 7AM to 10 PM each day. If you’re driving a zero emissions vehicle, this fee won’t apply to you. This exemption could be very important to anyone operating a business that uses company vehicles that drive in and out of such areas on a daily basis.

Changes Coming To Car Tax Laws

Recent changes to these tax laws will take effect in 2025. EV drivers will no longer be exempt from the VED but will pay a rate similar to drivers of petrol or diesel models within their pricing thresholds. This will apply to new or existing EVs and at current rates that could mean an annual bill of £165 after the first year. This rate is an estimate and is likely to increase by next year.

Company Car Benefits

Businesses that invest in EVs or other models with CO2 emissions of less than 50g/km are eligible for a 100% first year capital allowance. This means that a business could deduct the entire purchase price of an EV from their pre-tax profits. With a car costing £40,000, this tax break could save the business £7,600 off their tax bill in the first year.

Fuel Taxes and Electric Cars

If you drive a typical petrol or diesel car, 60p for every litre of fuel is a tax paid directly to the government. Since EV’s don’t use petrol or diesel, their owners don’t pay these taxes. If you’re using the electricity at your home or business to charge an electric vehicle, the rate paid per kWh is the same as the rate you pay of any other electric use.


As more and more EVs are on the roads, the taxes received via the VED will diminish and taxing authorities will have to come up with schemes to replace those taxes. Until then, EV drivers in the UK will benefit greatly.

Where to Buy EV and Petrol cars

If you’d like to find an EV but are put off by the price of new electric vehicles, you should check our gently used EV inventory here at Used Car Sales Direct. We have been one of the most trusted used car dealers in this area for years, and we have a vast wealth of experience offering quality vehicles. We constantly update our inventory, so you’ll have a wide selection to choose from. Each of our low mileage used vehicles has gone through a multi-point analysis performed by one of our highly trained technicians. They meticulously check the vehicle inside and out, under the bonnet, and on the road to make sure that the vehicle you purchase here is in tip top shape. Whether you’re in the market for one of our vehicles, need service or repairs to your vehicle, or need to get an MOT inspection, we are the place to go.