VED Expensive Car Supplement becomes applicable to many new EVs

From 1 April 2025, Vehicle Excise Duty (VED) changes applied to all new cars, including the Expensive Car Supplement (ECS), which became applicable to many new electric vehicles (EVs)¹. The Society of Motor Manufacturers and Traders (SMMT) said the change pushed transactions into March as buyers got ahead of the tax increases¹.

Under the rules set out by the SMMT, all new battery electric vehicles (BEVs) became subject to £10 VED in the first year of ownership, followed by annual VED of £195, currently, in years 2 to 6 (£975), for a total of £985. For BEVs priced above £40,000, an additional £425 is currently charged annually in years 2 to 6 (£2,125) on top of standard VED, giving a total of £3,110². The SMMT said the supplement could raise ownership costs for most EV drivers by more than £2,000 over the next six years². The £40,000 threshold has remained unchanged since 2017³.

The SMMT had flagged the change before it took effect. In February 2025 it said the ECS would add £2,125 over six years to the cost of BEVs with a list price above £40,000, and that BEVs are disproportionately affected because higher production costs mean the average BEV retails above the threshold³. Its figures put the JATO sales weighted average BEV list price in 2024 at £48,600³. In March 2025 the SMMT reported the largest month ever for electric car registrations, at 69,313 units, and said that performance would have been boosted by buyers seeking to get ahead of the taxation increase².

"the implementation of VED changes affecting all new cars, including the Expensive Car Supplement which became applicable to many new EVs from 1 April"

The April market followed. The SMMT reported 120,331 new car registrations in April 2025, down 10.4% on the 134,274 of April 2024 and 25.3% behind pre-pandemic April 2019, when 161,064 units were registered¹. It was the sixth fall in seven months¹. BEV registrations rose 8.1% to 24,558 units, taking 20.4% of the market, against 16.9% a year earlier¹. Year to date, BEVs were up 35.2% to 144,749 units, a 20.7% share¹.

Source: SMMT¹

The SMMT also said the ECS risked dragging down used EV affordability. In February 2025 it reported record used BEV transactions of 188,382 units in 2024, up 57.4%, and warned that from April many BEVs registered new would be subject to VED and the ECS, "drastically increasing ownership costs during the first six years of a vehicle's use and therefore likely to impact on the used market"⁴. It called for BEVs to be exempted from the ECS, or for the eligibility threshold to be raised⁴.

Why it matters for households

The supplement changes the running cost of a new electric car, not just its purchase price. A household buying a BEV listed above £40,000 now faces standard VED plus the supplement across years 2 to 6, a total the SMMT puts at £3,110, against £985 for a BEV below the threshold². Because the average BEV list price sits above £40,000, the SMMT expects most EV buyers to be affected³.

For a home weighing up electric motoring as a route to lower and more predictable energy costs, the tax sits alongside charging costs rather than replacing them. The SMMT has separately noted that households unable to charge at home pay 20% VAT on public charging, which it describes as quadruple the rate paid by those who can charge at home⁵. The SMMT has also said the ECS could affect used values, which matters to households buying second hand rather than new⁴.

What happens next

The SMMT revised up its full year 2025 new car registration forecast to 1.964 million units, while keeping 2026 expectations below two million for what would be the seventh successive year¹. It revised its BEV market share expectation down by 0.2 percentage points to 23.5% for 2025 and by 0.3 percentage points to 28% for 2026, against Zero Emission Vehicle Mandate targets of 28% and 33% respectively¹. The SMMT has called for the ECS to be scrapped or amended, for VAT on new EV purchases to be halved, and for VAT on public charging to be equalised with home charging¹. No government decision on those calls has been reported.

Sources5 cited

1. New car market falls in April as tax changes bite - SMMT, smmt.co.uk
2. Best month ever for new EV registrations but market share misses mandated target - SMMT, smmt.co.uk
3. EVs account for one in four new car registrations in flat February market - SMMT, smmt.co.uk
4. Demand for used EVs rises to record levels as second-hand car market grows in 2024 - SMMT, smmt.co.uk
5. New car market records best February for 20 years - SMMT, smmt.co.uk