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Last updated: 31/08/2021 | Estimated Reading Time: 3 minutes

Electric and hybrid cars: Tax savings and other benefits

Driving a car doesn’t have to cost the earth. If you choose to drive an eco-friendly vehicle then not only will you be doing your bit to save the planet, but you’ll also find yourself making drastic financial savings by not having to pay road tax.

Find out all about this and other savings you can make by driving an eco-friendly vehicle with this guide.

In This Guide:

Vehicle Excise Duty road tax

The Vehicle Excise Duty (VED) road tax rates payable are partially worked out in various bands according to CO2 emissions of the vehicle in question. According to the current system, which has been operating since 2017, all cars that emit any CO2 at all incur a standard rate of £140 a year (unless the car is worth more than £40,000, in which case there is a £310 supplement each year for 5 years).

Cars then have different rates payable in the first year, depending on their emissions. The breakdown is as follows:

Emissions (g/CO2/km) First year rate Standard rate*
0 £0 £0
1-50 £10 £140
51-75 £25 £140
76-90 £100 £140
91-100 £120 £140
101-110 £140 £140
111-130 £160 £140
131-150 £200 £140
151-170 £500 £140
171-190 £800 £140
191-225 £1200 £140
226-255 £1700 £140
over 255 £2000 £140

Road tax on electric cars

Fully electric cars with no emissions whatsoever are fully exempt from road tax. This applies whatever the list price of the EV - even if they cost more than the £40,000 cut off for the supplemental rate for other cars.

Road tax on hybrid cars 

If you own a hybrid car, you will have to pay tax at the standard rate, although you'll likely pay a reduced first year rate - most hybrid's emissions are under 100g/km.

Congestion charge savings for electric and hybrid cars

As well as the tax benefits, drivers of electric vehicles in London will find themselves exempt from the congestion charge that is the bane of so many drivers in the capital.

Currently, hybrid cars with emissions under 75g/km are also exempt from the congestion charge, but from October 2021, plug-in hybrids will have to pay it, and only fully electric, zero-emission vehicles will be exempt.

Insurance savings for eco-friendly cars

If you’re not already pleased at the vast array of savings you’ll make by driving an eco-friendly car, you will be when you find out that many insurance providers will also offer you discounts on cover.

Several insurers will offer a 5% ‘green discount’ in an attempt to promote the use of low to zero emission vehicles on the road.

So you’re saving money on petrol, road tax and congestion charges; you’ve found a selection of insurance providers offering a discount on your premiums; now all that’s left to do is to work out which is the best deal overall.

Head over to our car insurance comparison page and we’ll help you find the perfect deal for you, at no extra cost.

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