Millions of UK motorists are unaware of significant car tax hikes coming into effect from 1 April 2025. According by research by WeBuyAnyCar, up to 75% of drivers do not know about these changes, which could see some paying up to £2,745 more in tax.
Check your car tax here
These changes include new costs for electric vehicle (EV) owners and major increases for new petrol and diesel car buyers. The adjustments to Vehicle Excise Duty (VED) were announced in the Autumn Budget, with additional EV-related changes confirmed in 2022. The government expects these tax hikes to generate £400 million annually.
Higher 'showroom tax' for petrol and diesel and hybrid cars
From 1 April 2025, first-year VED rates for all new petrol and diesel cars will double. The highest-emission vehicles could face charges of up to £5,490 in their first year. These increases aim to encourage EV adoption by widening the tax gap between combustion engine vehicles and zero-emission cars.
Key changes include:
* New EVs will have a first-year VED of £10, up from zero.
* Plug-in-hybrids with emissions of 1-50g/km CO2 will pay £110 in first-year tax.
* Petrol and diesel cars emitting over 255g/km CO2 will see first-year VED rise to £5,490 (previously £2,745).
* Most petrol and diesel cars will see their first-year tax double, affecting even smaller, fuel-efficient models like the Toyota Yaris Hybrid.
For example, a new mild-hybrid Nissan Qashqai (144g/km CO2) will cost £540 in first-year VED, up from £270. High-emission SUVs and sports cars, such as the Range Rover V8 and Ford Mustang, will also be hit with the maximum £5,290 charge.
Electric vehicles to pay VED for the first time.
* Previously, EVs will pay £10 in first-year tax and the standard VED rate (£195) from year two.
* EVs registered between April 2017 and March 2025 will begin paying the full £195 annual rate.
* Older EVs (registered between March 2001 and March 2017) will pay a lower £20 annual rate
EVs over £40,000 hit with 'Tesla tax'
Expensive EVs will also be subject to the 'expensive car supplement,' which applies to vehicles priced above £40,000. This adds an extra £410 per year for five years, bringing total annual VED to £605 or more for affected vehicles. Around 70% of EVs on the market will fall into the category.
Even optional extra can push an EV above the £40,000 threshold, as the DVLA calculates tax based on the vehicle's full retail price, including add-ons.
These tax increases will significantly impact car buyers and owners. New petrol and diesel cars will become far more expensive to tax in their first year, while EV owners will lose their VED exemption. The changes are designed to push consumers towards EVs but they also introduce new financial burdens for all drivers.
Motorists should check how these changes will affect them here, before making any new vehicle purchases.
