Best tax-exempt cars

If you're looking for a new car that's tax exempt, then you'll need to go electric

Andrew Goodwin
Nov 3, 2021

If you're looking for a brand new car that’s exempt from road tax, your best choice is to go for an all-electric car. A new tax system was introduced on April 1 2017 that took tax-free status away from all other low-emission petrol, diesel and hybrid cars, and instead made them liable for an annual tax bill.

Only electric cars producing zero exhaust emissions are now tax-free, along with the handful of hydrogen vehicles on the road. Their purchase prices are also discounted, thanks to a government plug-in car grant, which provides up to £2,500 towards the cost of brand new electric cars with a value of up to £35,000.

All of these small savings help to reduce the overall cost of owning an electric car, although they are still generally a few thousand pounds more expensive to buy than a petrol or diesel equivalent, because they're more costly to manufacture. For really cheap motoring, you'll need to ensure that your car had a list price of less than £40,000 when it was new. Vehicles over this limit are liable to a tax surcharge under the new system, which will cost you an additional £335 per year in years two to six of ownership.

You can easily avoid this additional cost if you’re not set on a brand new car, though. Used cars, which were on the road before April 2017 and produce low levels of carbon dioxide emissions (the limit is 100g/km CO2 or less), continue to be taxed under the old system and retain their tax-free status, whether powered by petrol, diesel or electricity. They are also cheaper to buy, having lost a big chunk of their value already.

We’ve highlighted the best used tax-exempt cars in a separate article. Scroll down for our pick of the top five new, battery-powered tax busters.

Best new tax-exempt cars

1. Renault Zoe

Best tax-exempt car for chic style

Used deals from £19,700
Monthly finance from £301*

A new Renault Zoe was launched in 2020 with a subtly tweaked appearance that hid lots of changes underneath and in the cabin. Renault's bid to maintain its dominance in the small electric car market, the latest Zoe remains competitively priced against new rivals such as the Vauxhall Corsa-e and Peugeot e-208.

Amongst the upgrades is a 52kWh battery, giving the Zoe a range of up to 238 miles - a long way clear of the Corsa-e and the larger Nissan Leaf. It's best suited to city driving, with instant acceleration from a standing start, no gear changes to worry about (there's a single forward gear) and light steering that's ideal for narrow streets and tight turns.

If the original Zoe was a great introduction to EV motoring for thousands of owners, the second-generation model goes a long way to building on that foundation and offering an even more rounded EV experience. It even has a 338-litre boot, which is big enough for a weekly shop, while a large portrait touchscreen and soft-touch materials enhance the interior.


2. Nissan Leaf

Best tax-exempt car for families

Used deals from £18,841
Monthly finance from £310*

If you’re ready to take the leap and replace your family car with an electric model, then the Nissan Leaf is an excellent choice. With as much space inside as a Volkswagen Golf, a comfortable ride and a reasonable price (especially after the government Plug-in Car Grant), it doesn’t feel like a compromise when you’re behind the wheel.

That’s also because the Leaf e+ features an improved 62kWh battery, giving it an official range of up to 239 miles on a single charge.

Some considered the original Leaf awkwardly styled, but the second-generation model has a much more traditional design, with sharper creases and more angular headlights. To some it’s still the ugly duckling of electric cars; to others, it’s a mould-breaker. A surge in the popularity of electric models means the Nissan Leaf can hold onto its value impressively well, which results in some attractive PCP deals.


3. BMW i3

Best tax-exempt car for fun driving

Used deals Limited stock

Built from scratch as an electric car, the BMW i3 maximises the benefits of being able to position the battery pack and electric motor low in the car. Without the mechanical parts of a conventional combustion-engined car impeding on the interior, the i3 is surprisingly spacious and practical beneath its high-tech styling and rear-opening ‘suicide’ rear doors. A flat floor and tall roofline also means there's room for adults to stretch out in the back.

Early cars had a range of around 90 miles in normal driving, which increased to approximately 125 miles in 2017 with a larger 33kWh battery. Another update in 2019 increased the capacity of the battery to 42.2kWh, increasing range further to 189 miles. Should it run out of juice, the latest i3 can be charged from 0-80% in 45 minutes using a 50kW public charger.

It’s a BMW, so you do get a kick of power when you press the accelerator. The latest version will get from 0-62mph in a brisk 7.3 seconds, or just 6.9 seconds for the hotter i3s with extra power. And it’s nimble too, for a car that’s relatively tall and heavy. There's not a huge amount of grip, but the i3s increases its agility thanks to wider tyres and sports suspension.


4. Kia Soul EV

Best tax-exempt car for boxy charms

Used deals Limited stock

Even in conventionally powered form the Soul is a pretty unconventional looking car, so as an electric model, it fits right in with other quirky electric options such as the Nissan Leaf and Citroen e-C4. This is especially the case following a redesign to remove its front grille, for a smoother look.

Except for its digital dials, gloss white finish on the dashboard and 8-inch touchscreen with sat-nav, the EV’s interior is much like any other Soul’s, too. It’s on the road that it feels different. Like most electric cars, the power arrives in an instant and the motor is eerily quiet. The ride is quiet, too, making it a comfortable and relaxing car to drive.

It’s nippy around town but runs out of puff on faster, more open roads. If you find a fast charging point, you can charge the Soul in 30 minutes. Otherwise, it’s a 12-hour job using a domestic socket.


5. Hyundai Ioniq Electric

Best tax-exempt car for practicality

Hyundai Ioniq Electric front three quarters view

Used deals from £20,900
Monthly finance from £377*

The Hyundai Ioniq is similar to the Toyota Prius, in that it’s a five-door hatchback with green credentials. But the biggest difference is that Hyundai’s family hatchback comes in hybrid, plug-in hybrid, and fully electric versions.

This electric model is just as practical as the others, but it emits no emissions. Like many other electric cars it’s surprisingly quick off the line, but it begins to run out of steam above around 50mph, so it's best suited to town and suburban jaunts.

It also boasts Hyundai’s five-year/unlimited-mileage warranty, which is especially reassuring if you’re moving into an electric car for the first time. We doubt you'll need to call upon it, as the Ioniq Electric has proved highly reliable so far.


*Representative PCP finance - Ford Fiesta Titanium:

Monthly payments over 48 months: £192
Deposit: £0
Mileage allowance: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

Buyacar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.


Latest best cars & vans

  1. Most customisable cars

  2. Cars with suicide doors

  3. Best American cars