Drivers of new petrol, diesel and hybrid vehicles are set to face higher first-year tax rates from April.
In an attempt to drive consumers towards electric cars while widening the gap between “higher polluting” and other vehicles, the government will be increasing the first-year Vehicle Excise Duty (VED) for many new cars .
A car’s first-year tax figure is calculated by taking into account the amount of CO2 it produces. At present, electric vehicles don’t incur any VED charges, while cars emitting between 111g and 150g/km pay £220. Those that emit more than 255g/km pay £2,745 for their first year.
However, buyers of electric vehicles are set to pay £10 for their first year’s VED from April and that rate has now been frozen.
In contrast, all other rates of first-year VED are set to rise considerably with rates for petrol, diesel and hybrid vehicles all being increased – with most doubling.
Older electric vehicles (registered between 2017 and 2024) will start to pay £195 per year from April, while electric vehicles registered before 2017 will pay £20 per year.
Any car with CO2 emissions between 1-50g/km will jump from £10 in the first year to £110. Similarly, cars in the 51-75g/km band jump from £30 to £130.
Any car that emits 75g/km or more will see the first-year rate double.
An expensive car supplement – which sees buyers of new cars that cost over £40,000 pay an extra £410 a year for the first five years – won’t be extended to electric cars either. However, the government has said this could be introduced to electric vehicles at a future “fiscal event”.
The change means, from April, a new Ford Puma driver can expect a first-year VED rate rise from £220 to £440, while a buyer of a Range Rover could pay as much as £5,490 – up from £2,745 – in that first year of ownership.
When announcing the changes in her October Budget , chancellor Rachel Reeves said: “To help drive the transition to electric vehicles the government is strengthening incentives to purchase electric vehicles by widening the differentials in VED first-year rates between electric vehicles and hybrids or internal combustion engine cars.
“The government is also maintaining electric vehicle incentives in the company car tax regime and extending 100% first-year allowances for zero-emission cars and electric vehicle charge points for a further year.”
