Motorists across the United Kingdom are bracing for considerable changes to vehicle taxation as the government implements notable increases to Vehicle Excise Duty (VED) effective April 1, 2025. These tax hikes, particularly targeting new car buyers and owners of electric vehicles (EVs), are part of broader reforms aimed at encouraging environmentally friendly vehicle purchases and adjusting for inflation.
Under the new rules announced by the Treasury, first-year taxes for petrol and diesel cars will double based on their emissions. For those considering purchasing brand new vehicles, particularly those with higher emissions, the costs can be eye-watering. For example, previously, the first-year tax for vehicles emitting over 255 grams CO2 per kilometer was £2,745; this will surge to £5,490! This significant jump has been described by many as part of what’s being referred to as ‘stealth taxes’ aimed at boosting the Treasury’s revenue.
Elderly drivers and those with disabilities may have previously enjoyed exemptions, but as of April 1, 2025, all car owners will face increased tax rates. According to HM Revenue and Customs, “From 1 April 2025, registered keepers of electric, zero or low emission cars, vans, and motorcycles will need to pay vehicle tax the same way as registered keepers of petrol and diesel vehicles.” This marks the first time EV owners will have to pay VED, with first-year rates set at £10. The government aims to remove the previous exemptions for what they termed as the “Band A” vehicles, which have enjoyed tax-free status.
Richard Evans, spokesperson for the car buying service webuyanycar, stated, “For vehicles running on diesel or petrol emitting over 76g/km of CO2, the first-year tax will double compared to the current rate,” highlighting the significant financial impact facing these motorists. With initial VED costs doubling for new petrol and diesel models, drivers need to weigh their options carefully.
New research suggests staggering levels of unawareness among drivers, with reports indicating up to 75% of motorists do not grasp the full extent of the impending changes, according to polling by WeBuyAnyCar. This lack of awareness may lead some to be blindsided by the increases. Rachel Reeves announced these adjustments during her recent Budget statement, emphasizing the financial goal: “These increases will raise £400 million per annum for the Treasury.” This move signifies not just tax reform but also reflects the government’s strategy to reshape the motor vehicle market.
The most substantial increases will come for vehicles emitting over 255g/km of CO2. Cars like the BMW M4 will see their first-year VED rise to £4,680, and other high-emission vehicles will incur similar increases, deterring purchasers of gas-guzzling SUVs and performance cars. It’s worth noting, too, the effects on hybrid car owners: the annual discount for hybrids will be eliminated, placing more financial pressure on families and individuals as they navigate these costly adjustments.
The Labour government’s policy shift, initially introduced under the Conservatives, aims to encourage the transition to low-emission vehicles. Chancellor Rachel Reeves stated, “We want to strengthen incentives to purchase zero-emission and electric cars, by widening the differentials between zero-emission, hybrid and internal combustion engine cars.” The planned adjustments reflect how the government hopes to influence consumer choices by making less environmentally friendly vehicles more expensive to insulate the environment.
EV owners, previously exempt from the hefty vehicle excise duties, will now feel the financial pinch as the government pushes for greater adoption of electric and low-emission cars. Owners of new electric vehicles registered from April 2025 will initially have to pay £10 and thereafter will be subjected to the same standard VED rates as petrol and diesel vehicles. Although this initially appears favorable, it includes the potential for increases as economic pressures influence new tax brackets.
Alongside the £10 first-year charge, environmentally-conscious EV owners may find themselves paying additional hefty taxes if their car’s list price exceeds £40,000 due to the ‘Tesla tax’, which is levied on premium EVs. This adds yet another layer of complexity for those opting for modern, power-efficient vehicles.
The proposed changes to VED present not only a significant shake-up for UK motorists but also urge drivers to reconsider their position within the changing automotive ecosystem. With half of all new vehicles expected to be electric by next year, and the UK aiming to halt the sale of new petrol and diesel cars by 2030, the financial incentives—or penalties—will play a significant role shaping future vehicle registration choices.
These upcoming changes highlight the importance for motorists to stay informed about tax responsibilities and financial planning for vehicle ownership. The April 2025 tax increases demand consideration and strategizing from car buyers and owners alike, with financial commitment for the foreseeable future guaranteed to reshape mobility within the country.
