Are Drivers Ready For the Increase in Car Tax From 1 April

10th March 2025

Who is likely to be affected
Owners of cars, vans, motorcycles and holders of motorcycle trade licences who will be liable for Vehicle Excise Duty from 1 April 2025.

General description of the measure
This measure will uprate the Vehicle Excise Duty standard rates for cars, vans, motorcycles and motorcycle trade licences (excluding the first-year rates for cars) by the Retail Price Index, and will reflect the inclusion of zero-emission vehicles in Vehicle Excise Duty from 1 April 2025. This is a standard uprating to come into effect from 1 April 2025.

Policy objective
Increasing Vehicle Excise Duty rates by Retail Price Index in 2025 to 2026 will ensure that Vehicle Excise Duty receipts are maintained in real terms.

Background to the measure
This measure was announced at Autumn Budget 2024.

Vehicle Excise Duty is a tax on vehicle ownership, and rates depend on the vehicle type and first registration date. Vehicle Excise Duty rates have increased in line with inflation since 2010.

From 1 April 2025, zero-emission vehicles will be subject to Vehicle Excise Duty. Further information about how Vehicle Excise Duty will apply to zero emission vehicles can be found in the tax information and impact note titled ‘Introduction of Vehicle Excise Duty for zero emission cars, vans and motorcycles from 2025'.

From the second year of registration onwards, zero-emission cars will move to the standard annual rate.

Main changes to VED rates include:

High CO2 emitting vehicles: The first-year VED for new cars emitting over 255g/km of CO2 will increase from £2,745 to £5,490.

Moderate CO2 emitting vehicles: Vehicles emitting between 76g/km and 150g/km will see a steep rise in their first-year VED. For instance, a Ford Puma's rate will climb from £220 to £440.

Low CO2 emitting vehicles: Cars emitting between 1-50g/km will see their VED rise from £10 to £110. Those emitting 51-75g/km will experience an increase from £30 to £130.

Electric Vehicles (EVs): EVs were previously exempt but now they'll be subject to a nominal first-year VED of £10 starting in April 2025.