A simples guide

Car tax on electric cars

More and more people in the UK are investing in electric vehicles (EVs). In fact, it’s estimated that there are now more than 60,000 EVs registered on UK roads. There are a number of reasons for the growth in numbers.



Let’s start with the cars themselves. They might have been around for 10 years or so but only recently have they become a car that motorists might want to drive regularly!

The growth in the number of cars on the road means that the number of available charge points across the country has increased too, making them practical for more drivers.

Then there’s the cost angle.

Before we get to the question of car tax, it’s important to note that a new electric car doesn’t come cheap. A small model, such as the Citroen C-Zero electric car, will cost you about £17,000 on the road.

Government Grants

However, this isn’t necessarily the price that you’ll actually pay. The government has a grant system in place, which reduces the cost of an electric car by 35% of the cost to a maximum of £2,500 or £4,500 depending on the vehicles range. For vans, the grant is worth 20% of the cost to a maximum of £8,000.

So, for our Citroen C-Zero buyer, the price you could pay is £12,495. There’s no form filling to worry about either as the grant is taken off the car price at the time of purchase. The paperwork is the problem of the car dealer.

Yes, still expensive, in comparison to similar petrol or diesel vehicles, but there are some other cost advantages.

Car Tax

One of these advantages relates to car tax; EVs pay no car tax.

Regular cars registered since 2001 have to pay car tax based on their emissions. While there are currently some reductions in the tax for low, as well as zero emission vehicles, this will change for new cars from April 2017.

From then, only zero emission vehicles will be exempt from tax. Effectively, only EVs will pay no tax from April 2017.

If you buy a new hybrid, it will be taxed based on its emissions. Given these announced changes, you may be expected to pay more each year from next April.

Read our guide to find out more about the car tax changes next year.

Other cost benefits

- Fuel Tax

You’ll probably be aware that the government levies significant taxes on the price of fuel. Currently that’s 58p in every litre of petrol and diesel sold.

A battery powered EV will pay no fuel duty.

Owners will however have to pay VAT on the electricity used to charge the vehicle but at 5% this is generally much lower than fuel tax.

If you drive a hybrid you will have to pay fuel duty whenever you fill up in the normal way.

- Congestion charge

For drivers in and around London there is a further benefit. All EVs are currently eligible for a 100% discount on the Congestion Charge. With standard rates of £11.50 per day payable, this could be potentially worth £2,000 a year.

- Filling Up

Yes, last but not least, there’s the cost of filling up itself. Fuel costs are low due to the competitive price of electricity as well as the efficiency of the EVs themselves. Fuel costs can be as low as 3p a mile depending on your tariff, which means if you drove 10,000 miles a year, you’d save £800 on fuel alone.

We’re sure you won’t buy an EV simply because it’s exempt from car tax but it helps. Additionally, with already announced car tax changes coming in 2017 that reduce the relative attractiveness of low emission vehicles (by increasing the tax on them) the advantage of driving an EV is increasing.

So if you’re thinking about getting an EV, why not start a quote now and find out how much the insurance could be?

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