VED / Car Tax Changes 2025 Explained

As of 1st April 2025, car tax (it’s proper name is Vehicle Excise Duty)  in the UK is undergoing significant changes from car tax changes made in 2024. The British Labour-run government is implementing these changes to address various factors, including the increasing number of low-emission vehicles on our roads and the need to generate additional revenue for the Treasury.

How is UK car tax calculated?

How your car tax is worked out depends on when your car was first registered:

• For cars registered from the 1st April 2017, road tax is based on CO2 emissions AND original price
• For cars registered between 2001 and 2017, road tax is based on CO2 emissions (and not initial price of the car when new)
• For cars registered before 1st April 2001, the  UK car tax rate is based purely on the car’s engine capacity (measured in cc)

Key Car Tax Changes

• EVs will no longer be exempt from road tax – this is the BIG change for EV owners
• New EVs registered from 1st April 2025 will pay £10 tax in their first-year, then £195 per annum in subsequent years + a luxury car supplement on top from the 2nd year to the 6th year of life of the car
• EVs registered between 1st April 2017 and 31st March 2025 will pay the standard rate of car tax of £195 annually from 1st April 2025
• EVs registered between 1st March 2001 and 30 March 2017 will now pay £20 road tax annually

First Year Tax Rates for BRAND NEW Cars from April 2025

First-year tax rates for new petrol, diesel and hybrid cars will increase significantly – rates for older cars are treated differently:

• Cars emitting 1-50g/km CO2 will now pay £110 for the first year (previously £10)
• Cars emitting 51-75g/km CO2 will pay £130 (previously £30) for their first year on the road
• Cars emitting 76g/km CO2 or more will see their first-year tax doubled
• The most polluting new cars (over 255g/km CO2) will face a first-year tax of £5,490 (up from £2,745 per annum). Ouch!!

Note the above table is for all NEW cars registered from 1st April 2025 and in their first year on the road.

Standard Annual Rates for Cars registered AFTER 1st April 2017

• The standard rate for cars registered after 1st April 2017 and before 1st April 2025 will be £195 per year for all fuel types, including electric vehicles
• Hybrid vehicles will no longer receive the £10 discount on the standard new car tax rate
• This will generally be the rate that affects the average driver (typically) with a second hand car registered between 1st April 2017 and 1st April 2025.

Annual Tax Rates for Cars Registered BEFORE 1st April 2017

For cars registered before 1st April 2017, the car tax rates will continue to be based on CO2 emissions and are divided into bands from A to M. These rates haven’t changed all that much, with some small increases for some bands starting from 1st April 2025.

Here’s a breakdown of the annual rates for these cars:

• Band A (up to 100g/km CO2): Currently £0, increasing to £20 a year from 1st April 2025
• Band B (101-110g/km CO2): Stays at £20 a year
• Band C (111-120g/km CO2): £35 – up from £30 a year from 1st April 2025
• Band D (121-130g/km CO2): £160 – up from £165 from 1st April 2025
• Band E (131-140g/km CO2): £195 – up from £190 from 1st April 2025
• Band F (141-150g/km CO2): £215 – up from £210 from 1st April 2025
• Band G (151-165g/km CO2): £265 – up from £255 from 1st April 2025

It’s important to note that these rates apply to the majority of cars registered after 1st March 2001 but before 1st April 2017.

Expensive New Car Supplement Tax

• The supplement tax for cars costing over £40,000 will increase to £425 per year (previously £410) and is on top of the standard rate of £195 per annum
• This supplement will now apply to all electric vehicles registered as new from 1st April 2025
• It is payable from the second to the sixth year of the vehicle’s life

The British government believes if users are able to fund new cars worth over £40,000 (with or without extra options) then they can find £620 per annum (around £51 per month for car tax).

Why are these Car Tax Changes Being Brought in?

• Mainly to generate additional revenue: The changes are expected to bring in an extra £400 million per year for the UK Treasury
• To address the increasing number of low-emission vehicles paying little or no tax
• To incentivise the adoption of cleaner vehicles while ensuring all road users contribute to road maintenance

The Likely Impact on British Drivers

• Most UK drivers will see an increase in their annual road tax costs
• Buyers of new petrol, diesel and hybrid cars (WITHOUT the new luxury car supplement) will face significantly higher first-year tax rates
• Existing electric vehicle owners will start paying road tax after years of paying zero car tax
• Owners of expensive electric cars (over £40,000) will face additional costs due to the luxury new car supplement

These changes represent a significant shift in UK road tax policy, particularly affecting electric vehicle owners and buyers of new cars. We recommend that drivers should carefully consider these new rates when purchasing vehicles after the 1st April 2025 as they will impact the overall cost of ownership.