The government has announced a new electric car grant that’ll slash up to £3,750 off the cost of a new electric car. Obviously, there are some caveats to the scheme but the move should help motivate a faster switch to electrification and allow the UK to get closer to meeting its 2025 climate targets.
The scheme is only open to new electric cars that cost £37,000 or less and it’ll be available to redeem at the point of sale from 16 July 2025. It’s also worth noting that not every car will receive the same discount from the government. Only the most ecologically assembled EVs will get the full £3,750, with the rest receiving a either grant of just £1,500 or nothing at all.
This isn’t an indefinite fixture, either. The electric car grant will exist until the 2028 to 2029 financial year so, if you’re on the fence about buying an EV within the next couple of years, now might be the time to make your mind up. This new scheme replaces the discontinued plug-in car grant, at a cost to the taxpayer of £650 million.
How does the new electric car grant work?
Unlike the old plug-in car grant, which was universally applied to all EVs, this new electric car grant assesses eligibility on a case-by-case basis. It’s a three-tiered system built around the cleanliness of each car’s manufacturing processes.
The scheme consults the amount of emissions produced by the energy production required to feed the car’s battery assembly and vehicle assembly plants. Especially low energy emissions unlock a grant of £3,750. Higher emissions cut funding down to £1,500. And if the factories are found to be too polluting, the electric car won’t be eligible for a grant at all.
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Great electric cars like the Renault 4 are now even more affordable.
Unfortunately, the government hasn’t yet finalised the list of which manufacturers fall into which grant bracket. Currently, that makes deciding on an electric car more difficult, as we strongly recommend you take advantage of the most generous £3,750 discount wherever possible. As soon as parliament gets its act together, we’ll update you with a list of the best cars to buy using the scheme.
What else has the government done to support electrification?
This new electric car grant builds on the government’s recent announcement to spend a further £63 million on upgrading the nation’s electric car infrastructure. This package of investment will be used to install more electric car chargers at business depots and install cable channels in pavements to allow EV owners without driveways to recharge their cars at home with tripping pedestrians.
Some of that £63 million investment will also be used to move the NHS fleet into electric vehicles at 200 sites. The government says this will save the taxpayer millions – and it plans to reinvest the money saved on maintaining the NHS’s combustion fleet into patient care.
Labour’s funnelling a lot of money into improving the UK’s electric car uptake. In total, the government has pledged to spend £6 billion by the end of the decade, which is probably wise if it has any hope of achieving its self-imposed goal of a 28% EV new car sales mix before the end of the year.
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The small electric car segments stand to benefit the most from the grant.
We’re more than halfway through the year and the sales mix is still hovering around the 21% mark. Granted, that’s a huge improvement over the 16.6% EV sales mix the UK achieved in 2024, but there’s plenty of work to do to convince consumers to step away from combustion, especially as hybrid sales have been growing over the last year. By July 2025, hybrid car sales had already outstripped those of 2024 by 0.7%.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, seems confident the new grant will stoke fresh enthusiasm for EVs: ‘Today’s announcement of the return of government support for the purchase of electric vehicles is a clear signal to consumers that now is the time to switch.
‘Rapid deployment and availability of this grant over the next few years will help provide the momentum that is essential to take the EV market from just one in four today, to four in five by the end of the decade.’
What does this mean for you?
You’ll can now get behind the wheel of new electric car for less. However, we reckon this deal makes the most sense when shopping at the lowest end of the market, as it means you can save the most amount of money as a percentage of your car’s retail price.
Take the Leapmotor T03 as an example. It’s a great electric city car that, before any discounts, has a starting price of £15,995. Providing Leapmotor’s factories can slot into the government’s most stringent emissions bracket, the new electric car grant will shave a whopping 23% off its price, dropping it down to just £12,245. That’s utterly staggering value.
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Save the most amount of money as a percentage of your car’s value by shopping cheap.
The Renault 4, while still an excellent car, doesn’t make as much sense from a purely financial perspective. It has a starting price of £26,995. If Renault is eligible for the full grant amount, it’ll reduce the car’s price to £23,245. That only works out to a saving of around 14%.
In conclusion, if you’ve already made your mind up about which sub-£37,000 electric car you want, this new grant is an extra bonus. But if you’re still undecided about which EV to buy, you’ll save the most amount of money by going cheap and getting the biggest percentage discount you can. Check out our best cheap electric cars page for some inspiration.
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