2025 poised to be expensive year for EV drivers after benefits disappear

EV drivers face shelling out more next year to stay on the road when incentives change – but many of them are unaware of what’s coming.

That’s according to new research by a motor finance firm, which is warning that the changes could have a major impact on demand for electric vehicles.

EV owners are currently exempt from paying vehicle excise duty (VED) as well as the Expensive Car Supplement, which is an additional levy on cars with a list price of more than £40,000.

However, in 2025, both those benefits will be axed unless the new government opts for a U-turn.

The owner of any EV that exceeds the £40,000 threshold will have to pay an extra £410 a year via the supplement. Meanwhile, owners of EVs registered on or after April 1, 2025 will also have to pay the lowest rate of tax – £10 – for the first year then the standard VED rate of £190 from the following year.

Meanwhile, as of April 1, 2025, owners of EVs registered between April 2017 and March 2025 will be liable for the same annual VED charge as internal-combustion vehicles, which this year stands at £190.

Any EV registered between March 2001 and March 2017 will be liable for the equivalent of this year’s £20 annual VED charge.

A poll of 500 EV drivers by Close Brothers Motor Finance found that more than half of them (54 per cent) had bought electric vehicles to reduce costs and save money, while 17 per cent said they’d been swayed by incentives such as the government grant – a £1,500 subsidy towards the cost of a new EV. However, the grant was dropped out of the blue in June 2022.

The research found that a third (33 per cent) of the drivers wouldn’t have bought an EV if they’d known about the upcoming changes and almost a quarter (23 per cent) were unsure if they’d have bought an electric car in the first place.

Meanwhile, 42 per cent of the EV drivers were unaware of the impending removal of the  benefits.

Lisa Watson, Director of Sales at Close Brothers Motor Finance, said: “Changes to electric vehicle exemptions set to come into force in 2025 make for negative reading for both current and prospective owners.

“The current zero emission vehicle mandate, which requires 22 per cent of new cars manufactured this year to be electric, is already proving a challenge. The removal of available incentives could further dampen demand, which could cause further headaches for manufacturers.

“Many will feel the impacts of the changes. For example, the average price of a new EV is significantly higher than the Expensive Car Supplement threshold. The cost-of-living crisis, coupled with the fact that a majority of EV owners purchased their car to reduce costs, means the upcoming changes leave less reason for motorists to consider making the switch.”