The cost of car tax will rise dramatically for many drivers from tomorrow (1 April 2025) in the biggest shake up to Vehicle Excise Duty in almost a decade.
Among the most significant changes includes the doubling of first-year VED rates for petrol, diesel and hybrid models that is set to hammer the pockets of new car buyers.
Electric vehicle owners will also be forced to pay car tax for the first time from next month, while annual costs will rise for just about every driver in the country as part of annual increases in-line with inflation.
Despite these wholesale changes to car tax, the biggest since the flat standard-rate of tax was introduced in 2017, a poll has revealed that half of motorists don’t know about it.
Only 48 per cent are aware of 1 April car tax increases, despite the fact they’ll cost some drivers an extra £2,745, a recent survey by Go Compare shows.
Tom Banks, insurance expert at the comparison site, said: ‘The increase in first-year rates for VED could mean a substantial tax rise for anyone who decides to buy a new car this year.
‘It’s imperative that drivers are aware of this before they head to the showroom, or they could end up choosing a car that comes with a tax bill that they can’t afford.’
MailOnline and This is Money explains who is set to be clobbered hardest by the changes to car tax – and what EV owners need to do TODAY to defer a £195-a-year cost until April 2026.
Car tax increases will come into force from tomorrow (1 April 2025) and see costs for most drivers rise – including those who own EVs that have until now been exempt from VED
Why is car tax going up from 1 April?
Some of the changes to VED from 1 April 2025 were confirmed during Chancellor’s 2024 Autumn Budget statement.
Rachel Reeves said in October they would ‘strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars.’
However, EV owners are retrospectively being stung as VED exemption for zero-emission vehicles will be axed.
The cumulative increases in car tax costs for the nation’s drivers will raise £400million per annum for the Treasury, Reeves told MPs during her statement last October.
Chancellor Rachel Reeves said during the Autumn Budget that changes to VED will ‘strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars’
First-year VED rates for new petrol and diesel models will DOUBLE from 1 April 2025, meaning road tax costs as high as £5,490 for the most-polluting cars
First-year tax rates to DOUBLE for new petrol, diesel and hybrid cars
One of the biggest car tax changes from 1 April 2025 is the doubling of first-year ‘showroom tax’ for all new petrol, diesel and hybrid models.
This will see buyers of the most polluting new cars forking out an eye-watering £5,490 just for VED.
The tax raid on new combustion engine motors was confirmed in Ms Reeves’ Budget in October is part of the Government’s efforts to encourage drivers to choose electric vehicles.
However, experts labelled it a ‘shove, not a nudge’ towards EV uptake.
New electric cars will cost just £10 to tax in the first year – and this will be the case until 2029-30 under Labour rules.
To also encourage motorists to buy the greenest hybrid cars, new models emitting between 1 and 50g/km CO2 (which is achieved only by plug-in hybrids) will be subject to a £110 first-year VED rate.
For higher-emitting plug-in hybrids putting out between 51 and 75g/km CO2, the showroom tax will be £130.
But in a blatant move to discourage drivers from buying new petrol and diesel cars, first-year VED rates for any new car producing over 76g/km CO2 will double.
As such, this will see buyers incur huge costs, particularly those purchasing large family cars and especially anyone acquiring heavy, gas-guzzling SUVs and supercars.
‘All other rates for cars emitting 76g/km of CO2 and above will double from their current level for 2025-26,’ the Budget document stated.
| Emissions (g/km) CO2 | First-year VED for new petrol, diesel, hybrid and electric cars | Increase |
|---|---|---|
| 0 | £10 | £10 |
| 1-50 | £110 | £100 |
| 51-75 | £130 | £100 |
| 76-90 | £270 | £135 |
| 91-100 | £350 | £175 |
| 101-110 | £390 | £195 |
| 111-130 | £440 | £220 |
| 131-150 | £540 | £270 |
| 151-170 | £1,360 | £680 |
| 171-190 | £2,190 | £1,095 |
| 191-225 | £3,300 | £1,650 |
| 226-255 | £4,680 | £2,340 |
| Over 255 | £5,490 | £2,745 |
Even small conventional hybrid cars will be stung by first-year tax rate increases. A Toyota Yaris hybrid, considered one of the greenest superminis on the market, can’t escape – buyers of new models from 1 April will have to pay £330 for VED in the first year, up from £165 currently
Families buying a modest Nissan Qashqai with a 1.3-litre mild hybrid petrol engine will incur first year VED costs of £540 from 1 April
The lowest first-year VED rate for petrol and diesel cars – those emitting 76-90g/km CO2 – will rise from £135 to £270.
Even Toyota’s green Yaris hybrid, which puts out 91g/km CO2, will be stung with the double tax rise, increasing from £165 to £330.
Economical new cars with ‘mild-hybrid’ engines (offering a little electric assistance without sending any e-power to the wheels) that emit between 101-110g/km CO2 will suffer the first-year tax hike, rising to £390 from £195 previously.
A family buying a brand new 1.3-litre mild-hybrid petrol Nissan Qashqai (which emits 144g/km of CO2) would have to pay an extra £540 (up from £270) under the new rules.
However, the biggest financial sting will be for buyers of the most polluting vehicles.
Buyers of a mild-hybrid diesel Range Rover that emits 194g/km CO2 will be hit with a showroom tax cost of £3,300
Performance cars will be stung very hard by the tax changes. A BMW M4 – which emits between 226 and 230g/km CO2 – will cost £4,680 to tax for the first year
Any petrol or diesel car with emissions of 191-225g/km CO2 will be upped to £3,300 (from £1,650) for the first year.
This includes a new mild-hybrid diesel Range Rover, which has claimed CO2 emissions of 194g/km.
The initial VED costs for a brand new vehicle putting out 226-255g/km CO2 will be hiked to £4,680 (from £2,340). This would hook cars like BMW’s latest M4 performance coupe, which emits between 226 and 230g/km CO2.
The biggest increase of all will be for motorists purchasing new petrol and diesel cars with CO2 emissions in excess of 255g/km, which for the first year only will cost a staggering £5,490 (up from £2,745).
This will be incurred by a small number of popular models, including Ford’s Mustang coupe and some variants of its Ranger pick-up truck.
Buyers of Land Rovers with its V8 engine – including the Defender, Range Rover and Range Rover Sport – will also be stung £5,490 in the first year.
That said, most models falling into the highest VED band are supercars and sporty SUVs, like Lamborghini’s Urus.
The new Mustang is Britain’s most affordable new model with a V8 engine, starting from just over £55k. But with its high CO2 emissions, examples registered after 1 April will cost £5,490 to tax for the initial 12 months
VED standard rate to rise to £195 for cars registered after 1 April 2017
The standard rate of car tax for all cars registered after April 2017 is due to rise – though not dramatically.
Owners of these cars will see the cost of VED increase from £190 to £195 as part of an annual adjustment in-line with RPI.
Increases of up to £25 for cars registered between March 2001 and March 2017
Owners of vehicles falling into this age bracket are charged an annual VED rate by band based on emissions, rather than a flat fee as per newer models (above).
For owners of petrol, diesel and hybrid cars registered between March 2021 and March 2017, RPI increases will see increases of between £5 and £25 for most drivers.
Owners of cars registered after April 2017 can expect their next vehicle tax reminder notice to inform them that their car is going to be £5 more to tax
Older cars to be stung by car tax increases too
Motorists driving older vehicles will also be hit by the incoming VED increases.
Cars first registered between 1985 and 2001 will also be taxed a higher rate under RPI increase depending on their engine size.
Owners of a motor registered between these years with an engine below 1,549cc will pay £220 – up from £210.
And those with vehicles with engines over 1,550cc will incur an extra £15, taking their annual VED outlay to £360 (up from £345).
Keepers of classic cars over 40 years old will continue to avoid VED costs.
All cars registered before 1 April 1985 qualify as historical vehicles and are exempt from car tax.
From 1 April, owners of electric vehicles will have to start paying car tax the same way as drivers of petrol and diesel cars do
All electric car owners to pay VED for the first time
Until now, one of the big benefits of electric vehicles is the financial incentives that have come with them.
Amongst the biggest of these has been VED exemption.
However, that will all change from 1 April 2025, as owners of zero emission vehicles will have to start paying car tax the same way as drivers of petrol and diesel cars do under rules introduced three years earlier.
During his Autumn Budget statement in November 2022, then-Chancellor Jeremy Hunt told MPs: ‘Because the OBR (Office for Budget Responsibility) forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then, electric vehicles will no longer be exempt from vehicle excise duty.’
Despite the OBR’s previous projections for EV sales being wide of the mark – in 2024 accounting for just 19.6 per cent of all registrations – the Labour party is pushing ahead with Hunt’s changes and subject those driving zero emission vehicles to car tax.
Here’s how EVs of different ages will be impacted by the new rules…
New EVs registered on or after 1 April 2025
Buyers of new EVs will pay £10 for first-year showroom VED.
From the second year after registration, these EVs will be subject to the same standard rate of VED (£195) as internal combustion engine cars.
EVs registered between 1 April 2017 and 31 March 2025
Owners of existing EVs registered between 1 April 2017 and 31 March 2025 – electric cars that have until now evaded VED costs – will be forced to pay the full standard VED rate of £195 from 1 April.
EVs registered between 1 March 2001 and 31 March 2017
Even early adopters of electric cars won’t avoid the tax sting.
EVs registered between March 2001 and April 2017 will be subject to the lowest VED band costing £20.
This will only impact a small volume of drivers, given EVs were relatively rare in these years and very much in their infancy.
Buyers of new EVs costing more than £40k from 1 April 2025 will be subject to the ‘expensive car supplement’ additional tax. It has been dubbed a ‘Tesla tax’ because no vehicle from the US brand is less than £40,000
New EVs stung by £425 ‘expensive car supplement’
Not only will all EV owners face first-year showroom tax on new models and a standard rate thereafter, any new battery-powered model registered after 1 April 2025 that is priced above £40,000 will also be subject to an ‘expensive car supplement’.
It has been referred to as a ‘Tesla tax’ as almost every model sold by the American EV-maker is priced above the supplement’s threshold.
The DVLA confirms: ‘New electric and zero emission vehicles registered on or after 1 April 2025 with the list price exceeding £40,000 will attract the standard rate, plus the expensive car supplement for the first 5 years from the start of the second licence.’
This will impact a significant proportion of the EV market.
Auto Trader recently estimated that EV buyers are three times more likely to be hit by this luxury car tax than those purchasing new petrol and diesel models.
This is because EVs are typically more expensive than their combustion counterparts due to their pricey batteries.
Often, an EV has a £10,000 premium over a petrol equivalent.
Auto Trader warned this could derail the nation’s transition to greener motoring.
While there are numerous electric cars priced below the £40,000 additional tax threshold, the inclusion of optional extras requested by customers when new will likely push some of these vehicles into the expensive supplement bracket.
Even when buyers negotiate deals with dealers to get EVs for a discounted rate, this isn’t taken into account by the DVLA, which strictly uses the recommended retail price (RRP) with the options included to determine if a vehicle is subject to the premium tax rate.
On top of the standard VED rate of £195 paid from the second year following registration, owners of £40k-plus EVs registered after 1 April 2025 will have to pay this additional premium rate on top of the standard rate from year two to six.
With the expensive car supplement due to jump to £425 from 1 April, the annual VED outlay from the second year of ownership will be an eye-watering £620.
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