VED changes from April 2025: How electric and low emission vehicles will be affected?

From 1 April 2025, changes to car tax rules will impact every driver in the UK – so it’s wise to prepare now and understand what’s coming.

Paying car tax – officially known as Vehicle Excise Duty (VED) – is a legal requirement if you drive or even store your vehicle on public roads. Most drivers budget for it annually, but this year’s updates are more significant than usual.

There are major changes to first-year road tax, with most CO₂ emissions bands seeing their rates double. In addition, there will be modest increases to the standard annual rate, the expensive car supplement (for vehicles priced over £40,000), and changes to the tax bands for cars registered before 31 March 2017.

Take a look at our guide to find out exactly what to expect.

What changes are coming to car tax in 2025?

The UK’s car tax system is undergoing significant changes in 2025, particularly affecting electric and low-emission vehicles.

Key Changes

1. Electric Vehicle (EV) Taxation

Electric vehicles, previously exempt from VED, will now be subject to taxation:

• New EVs registered on or after 1 April 2025:
  • First-Year Rate: £10 (source: GOV.UK)

  • Subsequent Years: Standard annual rate of £195

  • Expensive Car Supplement: Additional £425 annually for five years, applicable to EVs with a list price over £40,000 (starting from the second year)

• Existing EVs registered between 1 April 2017 and 31 March 2025:
  • Now subject to the standard annual rate of £195

• Older EVs registered between 1 March 2001 and 31 March 2017:
  • Annual VED set at £20

 2. Adjustments to first-year rates for petrol and diesel vehicles

The first-year VED rates (also known as the “showroom tax”) have increased significantly, especially for high-emission vehicles:

• CO₂ emissions over 255g/km:
  • Increased to £5,490, up from £2,745
    (Source: The Sun, The Irish Sun, The Scottish Sun)

• 226–255g/km CO₂:
  • £2,745

• 191–225g/km CO₂:
  • £1,650

These changes aim to incentivise the purchase of lower-emission vehicles by penalising more polluting ones.

3. Standard rate and expensive car supplement

• Standard annual rate:
  • £195 for most vehicles

• Expensive car supplement:

Additional £425 per year for five years, applying to any vehicle with a list price above £40,000 — including EVs

4. Hybrid and low-emission vehicles

• The £10 annual discount for hybrids and alternatively fuelled vehicles (AFVs) has been removed

• The VED rate now depends on the registration date and CO₂ emissions

5. Cars registered between 1 March 2001 and 31 March 2017

• VED is based on CO₂ emissions, with annual rates ranging from £20 to £735
  (Source: Wikipedia)

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Implications for vehicle owners

These changes have several implications:​

• Increased ownership costs: Owners of high-emission vehicles and EVs with a list price over £40,000 will face higher annual taxes.​

• Purchasing decisions: Prospective buyers may need to consider VED costs when choosing between vehicle models, potentially favoring lower-emission options.​

• Market adjustments: Manufacturers might adjust pricing strategies to keep vehicles below the £40,000 threshold to avoid the expensive car supplement

Recommendations for vehicle owners

To navigate these changes effectively:

1. Stay Informed: Regularly check official resources for the latest VED rates and regulations.​

2. Assess Total Ownership Costs: Consider VED alongside other expenses like fuel, insurance, and maintenance when evaluating vehicle affordability.​

3. Explore Incentives: Investigate any available grants or incentives for low-emission vehicles that could offset increased tax liabilities.​

4. Consult Professionals: Seek advice from automotive experts or financial advisors to understand the full implications of these tax changes on your personal situation.​

Why the Changes?

• The government aims to create a fairer road tax system as the number of EVs increases.
• It’s also to ensure a sustainable funding model for road maintenance, as revenue from traditional petrol and diesel car VED declines.

Conclusion

The 2025 VED changes represent a significant shift in the UK’s approach to vehicle taxation, impacting all motorists. By understanding these changes and planning accordingly, vehicle owners can make informed decisions that align with both their financial considerations and environmental consciousness.​​