UK Car Tax Changes from April 2025

Introduction

In April 2025, the UK government implemented sweeping changes to Vehicle Excise Duty (VED)—commonly referred to as car tax, road tax, or vehicle licence. These changes mark a pivotal shift, particularly for electric and low-emission vehicles, which were previously exempt. For drivers, businesses, and fleets, understanding these updates is crucial to managing the full cost of ownership. Below is a comprehensive guide to what’s changed, why it matters, and how you can be prepared.

What’s Changed in 2025?

1. Electric & Zero-Emission Vehicles (ZEVs) Now Taxed

• Exemption ended: As of 1 April 2025, electric cars are no longer exempt from VED
• New tax structure:
  • New ZEVs (registered from 1 April 2025) pay £10 in their first year, then transition to the standard rate (£195) from year two.
  • Existing ZEVs registered 1 April 2017 – 31 March 2025 will move straight to the £195 standard rate at their next renewal after April 2025.
  • Older ZEVs (registered before 1 April 2017) now pay just £20 annually.

2. End of Luxury (Expensive Car) Supplement Exemption for EVs

• For vehicles with a list price over £40,000, the Expensive Car Supplement of £425 per year now applies to EVs as well, and it applies for years 2 through 6 after registration.

3. Higher VED for High-Emission Vehicles

• First-year rates have doubled, especially for vehicles with high CO₂ emissions:
  • For cars emitting more than 255 g/km, first-year VED can reach £5,490, representing a massive increase.
• Diesel vehicles face steep hikes—average increases around £1,114.
• Petrol and hybrids also see increases, depending on CO₂ band, with lower-emission hybrids in the 1–50 g/km range paying around £110 first year, compared to a previous £0–£10.

4. New Standard & Banded Rates

• The first-year VED band structure (for cars registered from 1 April 2025) by CO₂ emissions (in g/km) is now:
  • 0 g/km: £10
  • 1–50: £110
  • 51–75: £130
  • 76–90: £270
  • 91–100: £350
  • 101–110: £390
  • 111–130: £440
  • 131–150: £540
  • 151–170: £1,360
  • 171–190: £2,190
  • 191–225: £3,300
  • 226–255: £4,680
  • Over 255: £5,490.
• From year two onwards, most vehicles pay the standard flat rate of £195 per year, plus any applicable premium supplement.

5. Impact on Vans, Motorcycles, Hybrids, AFVs

• Electric vans and light commercial EVs now face VED like their petrol/diesel counterparts—rates apply from April 2025.
• Electric motorcycles and tricycles are now taxed at the lowest engine-size band.
• Hybrids and alternatively-fuelled vehicles lose their £10 discount, and pay based on registration date and emissions.

Why These Changes Matter for Drivers and Businesses

• Electric Vehicles (EVs) Lose a Key Incentive

The removal of tax exemption and the addition of the expensive-car supplement significantly raise the cost of owning EVs, especially premium models. The much-touted savings from zero VED are now gone, altering the financial calculus for potential buyers.

• Fuel-Polluting Vehicles Face Steep Penalties

High-emission petrol and diesel vehicles now attract very heavy VED costs—doubling or more in some CO₂ bands. This is a clear fiscal nudge toward greener vehicle choices.

• Additional Cost Layers for New VED Owners

Those buying or owning EVs now face layered costs:

1. First-year VED
2. Standard £195 annual rate (from year two)
3. £425 Expensive Vehicle Supplement (if applicable) for years 2–6
4. Plus all the usual ownership costs (insurance, charging/fuel, maintenance, etc.).

How to Plan Ahead: Key Strategies

1. Know Your VED Band

• Check your vehicle’s CO₂ emissions, registration date, and whether its list price exceeds £40k.
• Use the published first-year rate tables above to estimate your VED liability.

2. Budget for Ongoing VED

• After year one, expect to pay at least £195 annually, plus £425 for premium-priced vehicles for up to five years post-registration.
• Factor this into your total cost of ownership.

3. Incentivize Lower-Emission Vehicles

• Encourage use or sale of cars with emissions under ~50 g/km to pay only £110 in year one, and no supplement.
• Think twice about high-CO₂, high-VED vehicles—especially for fleets.

4. For EV Owners

• If buying after April 2025:
  • First year: £10 VED
  • Year 2–6: £195 + £425 (if list price > £40k)
  • Year 7+: just £195 (EV still subject to standard rate)
• Older EVs (pre-2017) pay only £20 annually, making them unexpectedly cost-effective relative to newer EVs with premium pricing.

5. Payment Options Matter

• Budgeting via Direct Debit (monthly or semi-annual) may cost a bit more overall compared to an upfront annual payment—but spreads out cash flow.
• Also, ensure your vehicle is legally taxed or SORN-declared to avoid fines or clamping.

Implications for BBG Motors UK LTD

As a leading UK automotive business, it’s essential for BBG to:

• Update customer guides to clarify new VED rules—and how they impact decision-makers at the point of sale.
• Position low-emission used EVs (pre-2017) as especially cost-effective amid rising VED burdens.
• Provide online VED calculators or guides to allow customers to estimate tax based on emissions, registration, and price.
• Train sales teams to address VED questions confidently—especially regarding EVs, premiums, and hybrids.
• Promote lower CO₂ models as smarter long-term investments, highlighting how VED costs factor into ownership budgets.

Summary at a Glance

Final Thoughts

The April 2025 VED reforms mark a turning point in UK vehicle taxation—ending EV tax exemptions, broadening annual charges, and ramping up penalties for high-emission vehicles. Whether you’re a consumer, fleet manager, or EV adopter, these changes demand attention.

At BBG Motors UK LTD, our mission is clear: help you navigate and mitigate these changes with clarity. Whether you’re advising customers, building fleets, or driving off in a car, stay informed—and drive smarter.