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Sofia Modiri Dockery
I research and write blogs on what’s happening in the EV-world.
Electric vehicles are becoming an increasingly common sight on UK roads. Electric cars offer drivers benefits that petrol and diesel cars just can’t match, from cheaper running costs to a quieter, more comfortable drive. However, the rules around electric cars and tax have changed.
In this article, we will take a look at some of the most frequent questions people have about electric cars. We’ll look at how much electric car road tax costs, whether EVs are cheaper to run, and how an electric car salary sacrifice scheme could help make switching to electric more affordable. So, do electric cars pay road tax in 2026?
Do Electric Cars Pay Road Tax in 2026?
Yes. Electric cars now pay road tax, officially known as Vehicle Excise Duty (VED).
Previously, fully electric vehicles were exempt from VED because they produced zero tailpipe emissions. However, this exemption ended on 1st April 2025. This means electric car drivers now need to pay VED in the same way as drivers of petrol, diesel and hybrid vehicles, although the exact amount you pay will depend on factors including when the vehicle was registered.
For new electric cars registered from 1st April 2025, the vehicle pays the lowest first-year VED rate (£10), before moving to the standard annual rate from the second year (£200). Some electric cars with a list price above the government’s threshold may also be subject to the Expensive Car Supplement. Although EVs are no longer exempt from road tax, they can still offer significant financial benefits, particularly when accessed through an electric car salary sacrifice scheme.
How is Road Tax (Vehicle Excise Duty) Calculated?
How much Vehicle Excise Duty (VED) you pay depends on factors including when your vehicle was first registered, its CO2 emissions and its original list price. For electric cars, this means the amount you pay can vary depending on the vehicle’s registration date and whether luxury car tax applies.
Employers Introducing the Scheme
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Are Electric Vehicles Cheaper to Run?
The cost of running an electric car depends on several factors, including the price of electricity, where you charge, the efficiency of the vehicle and how far you travel. Charging an EV at home is usually the cheapest option, although it can take longer than using public rapid chargers.
When working out whether going electric could save you money, it’s important to look beyond charging costs alone. You should also factor in road tax, as well as luxury car tax where applicable.
The best way to compare costs is to look at the total cost of running an EV against your current petrol or diesel car. This means factoring in everything you currently pay for, including fuel, insurance, road tax, servicing, breakdown cover and even depreciation.
Even with these additional taxes, electric vehicles can still be cheaper to run, particularly when you choose one through a salary sacrifice scheme rather than buying or leasing privately.
With Fleet Evolution, you can access manufacturer discounts on fully managed electric cars, with costs such as road tax, insurance, maintenance, tyres and servicing included within your monthly figure.
That means fewer separate motoring bills to worry about, while giving you a clearer picture of what your car will cost each month. And because payments are taken from your gross salary, before Income Tax and National Insurance, salary sacrifice can make driving an electric car even more cost-effective.
What are the Benefits of Electric Cars?
Electric cars can offer practical and financial benefits, whether you’re looking to cut your driving costs or simply make the switch to something new.
Some of the biggest benefits include:
- Lower running costs, particularly when charging at home
- Less routine maintenance thanks to fewer moving parts
- Instant power and smooth acceleration
- Zero tailpipe emissions
- Low Benefit-in-Kind tax rates for company car drivers
Home charging can make the savings noticeable. With some EV-friendly tariffs, it can cost as little as around £5 to fully charge at home overnight.
For eligible employees, salary sacrifice can make an EV even more affordable, with savings on Income Tax and National Insurance and many essential motoring costs included.
What is a Salary Sacrifice Scheme?
A salary sacrifice car scheme allows an employee to give up part of their gross salary in exchange for a car provided through their employer.
Because the sacrifice is taken from gross salary, eligible employees can make savings on Income Tax and National Insurance. Electric cars provided through salary sacrifice are still subject to Benefit-in-Kind (BiK) tax, although fully electric cars benefit from a relatively low BiK rate. For the 2026/27 tax year, the BiK rate for fully electric company cars is 4%.
If your employer offers an electric car salary sacrifice scheme, it’s a cost-effective way to drive a new EV. And although electric cars now pay road tax, salary sacrifice still offers valuable tax savings and includes many of your essential motoring costs, such as insurance, maintenance, road tax and breakdown cover, in one monthly payment.
There are still plenty of financial benefits to going electric, particularly through salary sacrifice. With potential tax savings and many motoring costs included in one monthly payment, it can be a simple and cost-effective way to drive a brand-new EV.
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Fleet Evolution offers innovative salary sacrifice schemes, helping employers and employees save on costs while promoting eco-friendly electric cars. Enjoy easy setup, free maintenance, and swift activation for any company size.
FAQs
Yes. Fully electric cars have been liable for Vehicle Excise Duty since 1st April 2025. The amount payable depends on factors including the vehicle's registration date and original list price.
No. Whether an EV attracts the Expensive Car Supplement depends on factors including its list price and first registration date.
No, but the rules have changed increasing the threshold from £40,000 to £50,000.
Yes, an electric company car is subject to Benefit-in-Kind tax. For the 2026/27 tax year, the BiK percentage for a fully electric vehicle is 4%.
No. An EV obtained through salary sacrifice is not automatically exempt from the Expensive Car Supplement. However, EV salary sacrifice can offer other tax efficiencies for eligible employees, and covers your road tax within the monthly payment.