New Car Tax Rules Coming in April 2025 – Here’s Everything Drivers Need to Know

The UK government is set to introduce significant changes to Vehicle Excise Duty (VED) starting from April 1, 2025.

These updates will impact petrol, diesel, hybrid, and electric vehicles, with electric cars facing taxation for the first time. The move aims to create a more balanced tax system as electric vehicle (EV) adoption grows and road maintenance costs increase.

If you own a vehicle, here’s everything you need to know about the upcoming tax hike and whether your car is affected.

Electric Vehicles to Lose Tax Exemptions

For years, electric vehicles (EVs) have been exempt from VED, a key incentive for buyers looking to switch from petrol or diesel cars. However, from April 2025, newly registered and existing EVs will be subject to taxation for the first time.

How Much Will EV Owners Pay?

• Newly registered EVs (from April 2025):
  • First-year rate: £10
  • Annual standard rate (from second year): £195
• EVs registered between April 1, 2017 – March 31, 2025:
  • Annual VED charge: £195
• EVs registered before April 2017:
  • Annual VED charge: £20

Petrol and Diesel Vehicles: Increased Charges

Traditional petrol and diesel cars will also see higher taxes under the revised system, particularly those with higher CO₂ emissions.

First-Year VED Based on CO₂ Emissions (For New Cars Registered from April 2025)

• Vehicles emitting 1-75g/km CO₂: Increase of £100
• Vehicles emitting over 255g/km CO₂: First-year tax rises from £2,745 to £5,490

Annual Standard Rate for Petrol & Diesel Cars

• Vehicles registered from April 2017 onwards: £195 per year
• Older petrol/diesel vehicles taxed based on CO₂ emission bands

Hybrid and Alternative Fuel Vehicles (AFVs)

Hybrid and alternatively fueled vehicles have enjoyed a £10 discount on standard VED rates. However, this discount will be removed from April 2025.

How Hybrid Car Owners Will Be Affected

• First-year rates based on CO₂ emissions (same as petrol/diesel cars)
• Annual standard rate: £195

Luxury Vehicles Over £40,000 to Face Higher Charges

If you own a car worth over £40,000, the government’s “Expensive Car Supplement” will still apply. This means an additional £410 annual charge for five years, starting from the second year of registration.

Electric Vans and Motorcycles Also Affected

• Electric Vans will now pay the same tax as standard petrol and diesel vans, with an annual VED of £355.
• Electric Motorcycles will transition to the lowest motorcycle tax band.

Why Is the Government Increasing Car Tax?

The VED reform aims to ensure all vehicle owners contribute to road maintenance costs. Previously, electric vehicle owners benefited from a tax-free status, but as EVs become more common, the government argues that they should contribute similarly to petrol and diesel car owners.

The change is also part of broader efforts to reduce reliance on fossil fuels while ensuring road infrastructure remains funded.

When Will the New Rates Apply?

These tax increases will come into effect on April 1, 2025, meaning anyone purchasing or owning a vehicle from this date will have to pay the revised rates.

What Should Car Owners Do?

If you are planning to buy a new car in the coming months, it may be worth purchasing before April 2025 to lock in lower tax rates. If you already own a vehicle, reviewing its new tax obligations is essential to budget accordingly.

Final Thoughts: What This Means for UK Drivers

With VED rates increasing across all vehicle types, drivers should prepare for higher running costs, particularly electric vehicle owners who will lose their tax-exempt status. Whether you drive a petrol, diesel, hybrid, or electric car, it’s crucial to understand the new tax brackets and how they will impact your expenses.

Key Takeaways:

• EVs will no longer be tax-exempt from April 2025
• Petrol and diesel cars face higher first-year tax rates
• Luxury vehicles over £40,000 will pay an additional £410 annually
• Check your car’s new tax rate before April 2025

As the deadline approaches, staying informed and planning ahead will help drivers navigate these changes effectively.

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