Electric vehicles are proving to be cheaper to fuel, less expensive to maintain and even less to insure than petrol or diesel cars. But did you know that there are further savings to be made when you lease an electric car when it comes to paying annual road tax?
The Benefit Of Making No Emissions
To incentivise people to switch over to electric, the government has made all zero emissions electric vehicles exempt from both the first year and subsequent years’ road tax. Even the additional annual surcharge for more expensive cars costing over £40,000 has now been scrapped for zero emissions vehicles to help encourage more people to opt for a more sustainable method of driving.
How Is Road Tax Calculated?
Tax bands for road tax – or Vehicle Excise Duty (VED) to give it its proper name – are based on CO2 emissions, so the bigger the harmful carbon footprint of a vehicle the higher rate of tax applied to it.
Currently the zero emissions – or 0gm of CO2 per km – band attracts literally zero tax, meaning all electric cars are exempt from VED. Contrast that with the hefty duties that are applied each year if you choose a petrol or diesel car that sits in the highest CO2 emissions band – over 255g/km.
In the first year, the duty to be paid on vehicles with CO2 emissions of 255g/km or over is £2,175, compared to the £0 for electric cars.
Does The Tax Rate Change After The First Year?
The short answer for zero emissions vehicles is no. You still continue to enjoy road tax-free motoring in an all-electric car. But for petrol, diesel (and hybrid) cars the burden continues…
For them, road tax is split into two different payments. The first year charge is calculated using a vehicle’s CO2 emissions and can range from as low as £10 for cars that emit as little as 50g/km of CO2 up to an eye-watering £2175 for cars that emit over 255g/km.
For the five years that follow, a further flat rate is applied for both conventionally fuelled vehicles and hybrid vehicles that cost less than £40,000. That annual road tax is £150 a year for a petrol and diesel, and £140 a year for hybrids.
And remember, fully electric zero emissions cars are exempt from not just the first year but all the subsequent years too, so if you choose to lease an electric vehicle, there will be no road tax payments included in your monthly charge throughout the length of your contract.
What Is A Premium Car Surcharge?
And the pain for petrol and diesel drivers doesn’t stop there. If they choose to drive a car with a list price of over £40,000 they must pay a surcharge on top of their road tax of £325. From April 2020 all zero emissions vehicles over £40,000, and therefore all electric cars, were given exemption from this payment, too, with the exemption expected to last until at least March 2025.
Why Do Hybrids Still Pay Road Tax?
Unlike fully electric vehicles, hybrids are not classed as zero emissions, as their petrol or diesel engines still create CO2 at the tailpipe. So while hybrid vehicles tend to have lower emissions because of their improved efficiency over a standard petrol or diesel they will still need to pay road tax.
The table below shows what you would expect to pay in the first year, depending on your car’s CO2 emissions. While a full electric car with zero emissions will pay nothing, a Toyota Prius hybrid that emits 94g/km of CO2 would pay £135 in year one.
Vehicle Excise Duty Emissions Bands – Year 1
The great news is that all the Vanarama Lease rates include the payments for these charges so you can be confident that you are covered for the whole time you have a vehicle from us.