Car tax hikes coming in April that 75% of Britons are unaware of: Some drivers pummelled by £2,745 increase
Millions of drivers are unaware of major car tax increases coming into force in a matter of months that will see some motorists stung an additional £2,745, new research has suggested.
Up to three quarters of motorists are unaware of new tax rules arriving from 1 April 2025, according to a poll by WeBuyAnyCar.
These include first-time costs for electric vehicle drivers and enormous financial implications for new car buyers.
Some changes to Vehicle Excise Duty (VED) were announced last year during Chancellor Rachel Reeves’ Autumn Budget statement in what was dubbed a stealth tax on petrol and diesel cars.
However, other new rules affecting EVs were confirmed back in 2022 by the previous Tory Government and will be retained by the current regime.
These increases in car tax will raise £400million per annum for the Treasury, Reeves told MPs during her statement last October.
For the 75 per cent of motorists who do not know about the changes to VED from April, This is Money has detailed the three main updates to car tax that will hammer the wallets of the nation’s drivers.
The Autumn Budget document revealed that Rachel Reeves will DOUBLE first-year VED rates for new petrol and diesel models, meaning road tax costs as high as £5,490 for the most-polluting cars
1. ‘Showroom tax’ rates DOUBLED for new petrol, diesel and hybrid cars
Car tax changes introduced in April will see the cost of first-year VED for all new petrol and diesel models double, stinging the most polluting cars with an annual charge as high as £5,490.
The tax raid on new combustion engine motors was confirmed in Rachel Reeves’ Budget in October.
The Chancellor said VED first-year rates for cars registered after 1 April 2025 will be adjusted to ‘strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars’.
However, the supporting Budget document revealed that Ms Reeves’ plot to extend the tax gap to greener vehicles would be achieved by doubling first-year VED rates – also known as ‘showroom tax’ – for petrol, diesel and many hybrid cars while costs for new EVs will rise from zero to just £10.
Experts have labelled it a ‘shove, not a nudge’ towards EV uptake.
Chancellor Rachel Reeves said the Government will change VED first year rates to ‘strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars’
| CO2 (g/km) | Petrol & diesel cars now | Petrol & diesel cars from 1 April 2025 | Alternative fuel (self-charging and plug-in hybrid) cars now | Alternative fuel (self-charging and plug-in hybrid) cars from 1 April 2025 |
|---|---|---|---|---|
| 0 | £0 | £10 | £0 | £10 |
| 0 50 | 10 | £110 | £0 | £110 |
| 51 75 | £30 | £130 | £20 | £130 |
| 76 90 | £135 | £270 | £125 | £250 |
| 91 100 | £175 | £350 | £165 | £330 |
| 101 110 | £195 | £390 | £185 | £370 |
| 111 130 | £220 | £440 | £210 | £420 |
| 131 150 | £270 | £540 | £260 | £520 |
| 151 170 | £680 | £1,360 | £670 | £1,340 |
| 171 190 | £1,095 | £2,190 | £1,085 | £2,170 |
| 191 255 | £1,650 | £3,300 | £1,640 | £3,280 |
| 226 255 | £2,340 | £4,680 | £2,330 | £4,660 |
| Over 255 | £2,745 | £5,490 | £2,735 | £5,490 |
The £10 showroom tax on zero-emission electric cars will be retained until 2029-30 to incentivise drivers to switch to greener cars, with the Labour government standing by its manifesto promise to ban the sale of new petrol and diesels in 2030.
To also encourage motorists to buy hybrid models in the interim, new examples with emissions between 1 and 50g/km CO2 (which is achieved only by plug-in hybrid models) will from April 2025 be subject to £110 first-year VED rates.
For plug-in hybrids emitting between 51 and 75g/km CO2, the showroom tax in 2025-26 will be £130.
But in a blatant move to discourage drivers from buying new petrol and diesel cars, the current first-year VED rates applied to these vehicles will be doubled.
As such, this will see buyers incur huge costs, particularly those purchasing large family models and especially anyone acquiring heavy, gas-guzzling SUVs and supercars.
‘All other rates for cars emitting 76g/km of CO2 and above will double from their current level for 2025-26,’ the document states.
The lowest first-year VED rate for petrols and diesel with emissions of 76-90g/km currently rings in at £135 today.
However, from 1 April, this will double to £270.
Even most small conventional ‘self-charging’ hybrid vehicles have CO2 emissions above this threshold.
Toyota’s Yaris hybrid, even in its least-polluting specification, puts out 91g/km CO2 and therefore will be stung with the double tax rise, increasing from £165 if you buy a new one today to £330 if you were to order one after 1 April 2025.
Even small conventional hybrid cars will be stung by first-year tax rate increases. A Toyota Yaris hybrid, considered one of the greenest superminis on the market, can’t escape – buyers of new models from 1 April will have to pay £330 for VED in the first year, up from £165 currently
Families buying a modest Nissan Qashqai with a 1.3-litre mild hybrid petrol engine will incur first year VED costs of £540 from 1 April
Frugal and economical new cars with ‘mild-hybrid’ (offering a little electric assistance without sending any e-power to the wheels) internal combustion engines emitting between 101-110g/km C02 will suffer the first-year road tax hike, rising to £390 from £195 previously.
A family buying a brand new 1.3-litre mild-hybrid petrol Nissan Qashqai (which emits 144g/km of CO2) would have to pay an extra £540 (up from £270) in the first year under the new rules.
Yet the biggest sting will be for buyers of the most polluting vehicles.
Buyers of a mild-hybrid diesel Range Rover that emits 194g/km CO2 will be hit with a showroom tax cost of £3,300
Performance cars will be stung very hard by the tax changes. A BMW M4 – which emits between 226 and 230g/km CO2 – will cost £4,680 to tax for the first year
The new Mustang is Britain’s most affordable new model with a V8 engine, starting from just over £55k. But with its high CO2 emissions, examples registered after 1 April will cost £5,490 to tax for the initial 12 months
Any petrol or diesel car with emissions of 191-225g/km CO2 will be upped to £3,300 (from £1,650) for the first year. This would include a new mild-hybrid diesel Range Rover, which has claimed CO2 emissions of 194g/km.
The initial VED costs for a brand new vehicle putting out 226-255g/km CO2 will be hiked to £4,680 (from £2,340). This would hook cars like BMW’s latest M4 performance coupe, which emits between 226 and 230g/km CO2.
The biggest increase will be for motorists purchasing new petrol and diesel cars with CO2 emissions in excess of 255g/km, which for the first year only will cost a staggering £5,490 (up from £2,745).
This will be incurred by a small number of popular models.
That includes the Ford Mustang coupe and some variants of Ford’s Ranger pick-up.
Buyers of popular 4X4s from JLR – including the V8 Defender, Range Rover and Range Rover Sport – will also be stung £5,490 in the first year.
That said, most models falling into the highest VED band are supercars and sporty SUVs, like Lamborghini’s Urus.
2. All electric car owners to pay VED for the first time
Until now, one of the big benefits of electric vehicles is the financial incentives that have come with them.
Amongst the biggest of these has been VED exemption.
However, that will all change from 1 April 2025, as owners of zero emission vehicles will have to start paying car tax the same way as drivers of petrol and diesel cars do.
During his Autumn Budget statement in November 2022, then-Chancellor Jeremy Hunt told MPs: ‘Because the OBR (Office for Budget Responsibility) forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I’ve decided that from then, electric vehicles will no longer be exempt from vehicle excise duty.’
Despite the OBR’s previous projections for EV sales being wide of the mark – in 2024 accounting for just 19.6 per cent of all registrations – the Labour party will push ahead with Hunt’s changes and subject those driving zero emission vehicles to car tax.
From 1 April, owners of electric vehicles will have to start paying car tax the same way as drivers of petrol and diesel cars do
Here’s how EVs of different ages will be impacted by the new rules…
New EVs registered on or after 1 April 2025
Buyers of new EVs will pay £10 for first-year showroom VED.
From the second year after registration, these EVs will be subject to the same standard rate of VED as internal combustion engine cars.
This will increase with RPI (Retail Price Index) inflation. Currently, the standard rate of car tax is £190 but will rise to £195 from April.
EVs registered between 1 April 2017 and 31 March 2025
Owners of existing EVs registered between 1 April 2017 and 31 March 2025 – electric cars that have until now evaded VED costs – will be forced to pay the full standard VED rate of £195 from 1 April.
EVs registered between 1 March 2001 and 31 March 2017
Even early adopters of electric cars won’t avoid the tax sting.
EVs registered between March 2021 and April 2017 will be subject to the lowest VED brand costing £20.
This will only impact a small volume of drivers, given EVs were relatively rare in these years and very much in their infancy.
Owners of EVs costing more than £40k new will be subject to the ‘expensive car supplement’ additional tax for the first time. For electric cars it has been dubbed a ‘Tesla tax’ because no vehicle from the US brand is less than the £40,000 premium tax threshold
3. EVs also stung by a supplementary ‘Tesla tax’
Not only will all EV owners face first-year showroom tax on new models and a standard rate thereafter, battery-powered models will also be subject to the ‘expensive car supplement’ levied on all models with an on the road price of £40,000 or more.
It has been referred to as a ‘Tesla tax’ because no vehicles sold by the American EV-maker are priced below the supplement’s threshold.
The DVLA confirms: ‘New electric and zero emission vehicles registered on or after 1 April 2025 with the list price exceeding £40,000 will attract the standard rate, plus the expensive car supplement for the first 5 years from the start of the second licence.’
This will impact a significant proportion of the EV market.
Car magazine Auto Express estimates that seven in ten battery cars will be stung by the expensive additional tax and will ‘create further cost barriers for drivers looking to transition to EVs’.
While there are numerous electric cars priced below the £40,000 additional tax threshold, the inclusion of optional extras requested by customers when new will likely push some of these vehicles into the expensive supplement bracket.
Even when buyers negotiate deals with dealers to get EVs for a discounted rate, this isn’t taken into account by the DVLA, which strictly uses the recommended retail price (RRP) with the options included to determine if a vehicle is subject to the premium tax rate.
On top of the standard VED rate of £195 paid from the second year following registration, owners of current EVs up to six years old and priced above £40,000 will have to pay the additional premium rate, which is currently set at £410 – but could increase with RPI from 1 April.
As such, drivers of £40k-plus EVs that have been paying zero car tax until now are set to be hit with annual VED costs of up to £605 or more.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
