Now automotive makers are slashing EV costs so consumers can keep away from Labour’s £425-a-year tax sting from April – here is how YOU can cheat the system…

Electric car drivers will be forced to pay car tax for the very first time from 1 April 2025 – and there’s a massive sting in the tail for owners of EV models that cost over £40,000.

Under new Vehicle Excise Duty (VED) – commonly referred to as car tax – rules ushered in by the Labour Government, brand new electric cars will be subject to £10 tax for the first year and a standard rate of £195 every year thereafter.

However, there’s an even greater tax sting that will impact around seven in ten battery cars, both new and those already on the road today.

That’s because electric cars will – like petrols and diesel models – be subject to an ‘expensive car supplement’ (ECS) if they cost more than £40,000 when new.

This ‘Tesla tax’ – as it has been dubbed by industry insiders due to the US car brand only selling premium-priced models – will see owners wrangled into paying £425-a-year on top of the standard rate of tax for five years, from April increasing the total annual VED outlay drivers of £40k-plus EVs from zero to an eye watering £620.

The decision to impose the ECS on EVs – which traditionally are more expensive than their internal combustion engine alternatives due to the high cost of batteries – has received intense criticism from industry. 

With the new rules approaching in just a matter of weeks, one brand has taken matters into its own hands by slashing the price of its top-of-the-line EV below the £40,000 ECS threshold so that customers can avoid the £425-a-year premium tax.

For those driving an EV less than six years old that cost over £40k when brand new, there is a way to cheat the system and avoid paying £620 in VED this year. We explain how… 

Abarth, the sporty arm of Fiat, has trimmed the price of its new 600e Scorpionissima to ‘ensure future customers will avoid the Expensive Car Supplement which comes into effect on April 1, 2025’, it said in a statement on Thursday.

Originally costing £41,975, the range-topping EV’s on the road (OTR) price has been cut back by £2,100 to £39,875 to ensure it sits below the £40,000 ECS ceiling.

The standard Abarth 600e’s OTR pricing will remain at £36,975, comfortably below the £40,000 threshold.

Giuseppe Cava, UK managing director for Fiat and Abarth, said: ‘Recognising that our top-of-the-range Abarth 600e Scorpionissima would have attracted the Expensive Car Supplement coming in April, we’ve made the decision to reduce the price of the car and protect our customers from this tax rise.’

Other brands with EVs priced just above the £40k threshold are likely to follow suit in the coming weeks as part of efforts to not deter customers at a time when private demand for electric cars is already low. 

Why are EVs subject to car tax from 1 April 2025? 

Until now, one of the major benefits of owning an electric vehicle is the financial incentives that have come with them. 

Amongst the biggest of these has been VED exemption.

However, that will all change from 1 April 2025, as owners of zero emission vehicles will have to start paying car tax the same way as drivers of petrol and diesel cars do.

The new rules for EVs were first announced by the Tory Government some three years ago. 

During his Autumn Budget statement in November 2022, then-Chancellor Jeremy Hunt told MPs: ‘Because the OBR (Office for Budget Responsibility) forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then, electric vehicles will no longer be exempt from vehicle excise duty.’

Despite the OBR’s 2022 projections being well wide of the mark – in 2024 EVs accounted for just 19.6 per cent of all registrations – the Labour party will usher in Hunt’s changes and subject those driving zero emission vehicles to car tax for the very first time.

While buyers of new EVs will pay £10 for first-year ‘showroom tax’, owners of electric cars registered after April 2017 will have to pay a standard rate of VED of £195 under the new rules.

Older EVs – those registered after March 2001 and before April 2017 – will be subject to the lowest VED band for this vehicle age group, which is £20 a year. This will only impact a small volume of drivers, given EVs were very much in their infancy and far rarer than they are today. 

Labour to sting EVs with Expensive Car Supplement

While it had been hoped that EVs would retain their exemption from the ECS, which has been levied on petrol, diesel and hybrid models with an OTR price of £40,000 since 2017, this will not be the case come 1 April.

The DVLA confirms: ‘New electric and zero emission vehicles registered on or after 1 April 2025 with the list price exceeding £40,000 will attract the standard rate, plus the expensive car supplement for the first 5 years from the start of the second licence.’

On top of the standard VED rate of £195 paid from the second year following registration, owners of current EVs up to six years old and priced above £40,000 will have to pay the additional premium rate, which is due to jump to £425 from 1 April.

This is levied from year two to year six on top of the standard rate of VED (£195).

As such, drivers of £40k-plus EVs that have been paying zero car tax until now are set to be hit with annual VED costs of £620. For those with year-old EVs, the total bill over a five-year ownership period could mount to a minimum of £3,100, with rates likely to rise again in line with inflation in upcoming years.

And the ECS will impact a significant proportion of the EV market.

Car magazine Auto Express last year estimated that seven in ten battery cars will be stung by the expensive additional tax.

It said it will ‘create further cost barriers for drivers looking to transition to EVs’.

The Society of Motor Manufacturers this week criticised the decision to levy the ECS on electric cars, dubbing it the ‘wrong measure at the wrong time’.

With consumers ‘still reticent’ to make the switch to electric cars, introduction of car taxation for EVs and the ECS on 1 April ‘comes at the worst time for the industry’ and risks ‘undermining the goal of a mass market transition’, SMMT chief executive Mike Hawes said.

‘Affordability remains a major barrier to uptake, hence the need for compelling measures to boost demand, and not just from manufacturers,’ he added.

‘The application, therefore, of the ‘Expensive Car Supplement’ to VED on electric vehicles is the wrong measure at the wrong time. 

‘Rather than penalising EV buyers, we should be taking every step to encourage more drivers to make the switch, helping meet government, industry and societal climate change goals.’

While there are numerous electric cars priced below the £40,000 threshold – including Abarth’s sporty 600 as of this week – the inclusion of optional extras requested by customers when they order EVs new will push many of these vehicles into the expensive supplement bracket.

That’s because the Government uses the retail price of the vehicle – not the price a buyer paid – to calculate if it falls into the ECS bracket.

Even when buyers negotiate deals with dealers to get EVs for a discounted rate, this isn’t taken into account by the DVLA, which strictly uses the recommended retail price (RRP) with the options included to determine if a vehicle is subject to the premium tax rate.