Tesla tax shock: Model 3 is NOT road tax free

Tesla Model 3 UK ordering

One of the big sells of electric cars, such as the Tesla Model 3, is the savings you can make over the long term. They’re not as expensive to ‘fill up’ and they’re usually a bit cheaper to maintain.

The government also rewards their zero tailpipe emissions with zero-rate Vehicle Excise Duty road tax. However, that’s surprisingly not the case with the Tesla Model 3, which begins UK deliveries from June 2019…

Although the £3,500 Plug-in Car Grant takes the price of Tesla’s most affordable model down to £38,900, the pre-grant list price of the Tesla Model 3 starts above £40,000.

This, as part of the government’s unpopular 2015 Summer Budget road fund licence changes, makes it liable for a five-year, £310 per-year ‘additional rate’ road tax. It thus effectively more than halves the £3,500 government contribution to the price of the car for long-term Tesla owners.

How can a zero-emission Tesla be taxed?

“But it’s electric. It’s zero-emissions!” we hear you cry. Sadly, the DVLA makes no exceptions for electric cars: they are still hit with the ill-conceived charge.

All new cars (registered on or after 01/04/2017) with a list price over £40,000 have to pay a £310 per-year base rate for five years from after the start of its second licence. To be clear, that’s one year after you buy it new, when the first VED road tax duty is due.

It’s only the first-year licence rate that zero-emission cars are exempt from – the rate that pertains to emissions. The second licence rate pertains to purchase price – namely, the official list price, not any post-grant prices…

A Motoring Research reader told us that Tesla Canada priced the Model 3 to escape such region-specific charges. Unfortunately, the firm was not able to make any adjustments to the UK price of the entry-level Model 3 to escape the five-year VED road tax penalty.

Of course, other premium electric cars such as the Jaguar I-Pace and Audi e-tron are also liable for this five-year charge. But the Tesla Model 3 is billed as a high-volume car, meaning many owners will be surprise the British government is still charging them for going green – particularly when you look at some of the models which will pay less in annual VED…

A BMW 3 Series that’s cheaper to tax than a Tesla?

Tesla tax BMW 3 Series

Ultimately, this means some rivals to the Tesla Model 3, in configurations costing under £40,000, could wind up costing buyers less in road tax.

You’ll have to be specific in your spec to make serious savings, though. In the case of the BMW 3 series, the only model with which you’ll be making significant savings, is the plug-in 330e.

Prices are yet to be confirmed for the new car, which goes on sale in July, but the previous car had an on-the-road price of just over £36,000. That’s under the £40,000 mark. The new car emits just 39g/km of CO2, which makes it tax-free (like the Tesla) from first registration.

Given it’s an ‘alternative-fuel vehicle’, it’ll cost £130 per-year after its second registration. The end result? The 3 Series plug-in hybrid could cost less than half of what a Tesla Model 3 will to tax, providing it stickers for under £40,000…

Tesla Model 3 UK ordering

In fact, any car under £40,000 that produces less than 100g/km of CO2 will be cheaper to tax than the Tesla Model 3. Over a longer term, perhaps. Anything that isn’t a hybrid or zero emissions is chargeable for the first year whereas the Tesla goes free for 12 months.

The entry-level Tesla Model 3 WILL be VED-free

Of course, there is a Tesla that will cost nothing to tax on its way. The genuine ‘entry-level’ car is predicted by Elon Musk to cost around £33,000 when it arrives in the UK. That takes the Model 3 below the magic £40,000 mark, and out of the firing line for that £310 per-year sting.

If you really want to pinch the pennies while zero-emission motoring, wait for that. Or, perhaps, buy a rival such as a Kia e-Niro or Hyundai Kona Electric instead…

3 replies
  1. Frank
    Frank says:

    If your old car is still good and money matters, just wait til the old car hits end of life. If you can afford it, why wait? Any EV on the road is better than an ICE. In our family we desperately want to get an EV as soon as possible, but the timing needs to be right for us in order to match our financial cycle for new cars. So we’ll wait until the old car dies, hopefully Model Y will be available by then. Currently this is our most favored car. The “problem” with e-Niro and Kona is their delivery times, you need to account for that. They are really nice cars and have a good price point.

  2. Rob
    Rob says:

    Had been thinking of getting a Tesla Model 3 but because of the stupid 40k tac rip off l will find something cheaper. So Tesla has lost a customer because of this.


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