UK car tax changes 2025: what you need to know

Driving is about to get more expensive in 2025, and not just for petrol and diesel vehicles; owners of electric vehicles (EVs) will be hit too. As part of her Autumn budget, chancellor Rachel Reeves has announced significant tax increases, with motorists set to feel the blow. Tax rates can be confusing, especially when it comes to motor vehicles. But don’t worry, we’re here to help. Below is a full guide on everything you need to know about car tax changes in 2025:

What is car tax and why do I have to pay it?

Vehicle Excise Duty (VED) – also known as car tax or road tax – is an annual tax that vehicle owners in the UK must pay to legally drive on public roads. The amount you pay depends on factors like your car’s engine size, fuel type, and CO2 emissions.

VED also helps fund road maintenance and infrastructure, promoting cleaner, more environmentally friendly vehicles.

New VED rates are set to increase in line with inflation as measured by the Retail Price Index (RPI).

You have to pay VED to ensure your vehicle is legally compliant and to contribute to the upkeep of roads and related services. Plus, it’s a way to encourage people to opt for more eco-friendly cars by making higher-emission vehicles more expensive to tax.

How is car tax calculated?

The amount of VED you pay is based on the type of vehicle you drive and the type of fuel it uses. For cars registered after 1st March 2001, VED is determined by the vehicle’s CO2 emissions, which are based on manufacturer data and divided into bands from A (lowest) to M (highest) according to the CO2 emitted per kilometre (g/km). For cars registered before 1st March 2001, VED is based on engine size. You can find VED rates and more information here on the Government website

How much will my car tax be in 2025?

For cars registered after April 1, 2017, the new rules will apply. However, cars registered before that date will continue to be taxed under the previous system. Vehicles registered between 1984 and 2001 have unique tax rules based on engine size.

Petrol and Diesel Cars

The most significant VED changes affect the first year’s tax, known as the ‘showroom tax,’ (Expensive Cars Supplement tax) calculated based on CO2 emissions. Cars emitting 1-50 g/km of CO2 will see first-year tax jump from £10 to £110, 51-75 g/km to £130, and all other rates for vehicles emitting 76 g/km or more will double. The second-year rate for petrol and diesel cars will remain £190 per year.

Electric Cars

From April 2025, electric vehicles (EVs) will no longer be exempt from road tax. In the first year, EVs will incur a £10 charge. From the second year onward, cars registered after April 1, 2017, will pay an annual flat rate of £195, and those registered before April 1, 2017, will pay £20 annually. EVs priced above £40,000 will now be subject to ‘showroom’ tax annually between the second and sixth years of ownership.

Hybrid Cars

Hybrids registered on or after April 1, 2017, will lose their £10 annual VED discount starting in 2025, paying the standard flat rate of £195 per year, in line with petrol and diesel cars. Hybrids registered before 2017 will continue to be taxed based on CO2 emissions under the older system. 

Autumn budget: What’s changing for your car tax in 2025

Here’s an overview of the key changes, which will take place from 1 April 2025:

• Electric cars are no longer tax exempt: zero-emissions cars registered from 1 April 2025 will pay £10 in first year VED (“road tax”), then £195 for every year after that
• Electric cars now have to pay the ‘showroom tax’ too: cars with an RRP above £40,000 have to pay an additional £410 per year on top of VED payments for the first five years after it’s registered, known as Expensive Cars Supplement tax (ECS). EVs were previously exempt, but this will change in April 2025
• There will be VED hikes for petrol, diesel and hybrid cars: Any car with CO2 emissions between 1-50g/km (essentially most plug-in hybrids) will jump from £10 in the first year to £110. Similarly, cars in the 51-75g/km band jump from £30 to £130. And anything that emits 75g/km or more will see the first-year rate double.
• Benefit-in-kind rate (Company car tax) will increase for all vehicle types:
  • For EVs, it will increase by 1% each year from 2025 to 2028 (currently at 2%)
  • Vehicles producing 75g/km of CO2 or more will see a 1% BIK rate increase in April 2025, remaining constant until at least 2028.
  • The percentage scale based on CO2 emissions will still apply, with a maximum BIK rate of 37% for high-emission vehicles (over 170g/km).
• CO2-based tax means it’s still much cheaper to run an EV

First-Year Road Tax VED for New Cars

The first-year road tax VED for new cars is a one-time payment made when a new vehicle is registered. This rate is determined by the vehicle’s CO2 emissions and fuel type, making it a crucial factor for new car buyers to consider. Starting from April 2025, the first-year rates will range significantly, from as low as £10 for electric vehicles (EVs) to a hefty £5,490 for high-polluting cars.

For petrol and diesel cars, the rates have seen a substantial increase, effectively doubling. For instance, cars with emissions between 76-90g/km will now face a first-year road tax of £270. Hybrid cars, which are often seen as a middle ground between traditional and electric vehicles, will also see changes. Hybrids with emissions between 1-50g/km will pay £110, while those with emissions between 51-75g/km will be taxed at £130.

These changes underscore the government’s push towards reducing emissions and promoting cleaner alternatives. Whether you’re considering a petrol, diesel, or hybrid vehicle, it’s essential to factor in these new first-year VED rates when making your purchase decision.

Standard Rate Car Tax for New Cars

Once the first year is over, the standard rate car tax for new cars kicks in, applying from the second year of registration onwards. This rate is primarily based on the vehicle’s fuel type and CO2 emissions, ensuring that ongoing costs reflect the environmental impact of the vehicle.

For cars registered from April 2017, the standard rate is set at £190 for petrol and diesel cars. Hybrid cars, which offer a blend of traditional and electric power, benefit from a slight discount, paying £10 less annually. Electric vehicles, which were previously exempt, will now also pay the standard rate of £190 from the second year of registration.

Additionally, there’s an extra charge for cars with a list price over £40,000, known as the expensive car supplement. This supplement adds £410 to the annual tax bill for the first five years after the car is registered. This measure aims to balance the scales, ensuring that more expensive and potentially higher-polluting vehicles contribute more towards road maintenance and environmental initiatives.

Car tax bands explained

Vehicle tax bands are based either on engine size, or fuel type and carbon dioxide (CO2 emissions), depending on when the vehicle was first registered.

In order to tax a vehicle, it must have suitable car insurance cover and a valid MOT if it is over three years old (four years in Northern Ireland). Both are checked electronically when you apply for car tax.

How do I find out the tax band for my car?

To determine your car’s tax band, you’ll need to know the year it was registered. Check the V5C logbook for your vehicle and locate the date of first registration on the first page. With the registration year in hand, you can then identify the specific tax band and annual cost for your vehicle.

Tax bands for cars registered before 1 March 2001

Vehicles registered prior to 1 March 2001 are categorized as Private/Light Goods (PLG) vehicles, or private motor cars or goods vehicles with a maximum revenue weight of 3,500kg. There are two categories, based on engine size:

Tax bands for cars registered between March 2001 and April 2017

Vehicles registered between March 2001 and April 2017 fall into one of 13 VED tax bands based on their CO2 emissions. Essentially, lower CO2 emissions result in a lower tax band.

Currently, vehicles with CO2 emissions below 100g/km are exempt from road tax; however, this will change in 2025 when cars in Band A will be moved into Band B.

The road tax for petrol and diesel vehicles registered during this period is more or less the same.

For alternative-fuel vehicles, like hybrids, plug-in hybrids, and those running on LPG, CNG, or biofuel, the VED is £10 less compared to standard petrol or diesel vehicles.

Tax bands for cars registered after April 2017

Below you can find a comparison between the current tax rates and the new tax rates set to come into force from 1 April 2025. As you can see, zero-emission vehicles (band A) will have to pay £10 in first year VED, then £195 for every year after that:

What cars are exempt from road tax?

Some vehicles will continue to remain exampt from road tax. This includes:

• Classic cars over 40 years old
• Vehicles used by disabled drivers
• Vehicles used to transport disabled passengers
• Mobility scooters, powered wheelchairs and invalid carriages
• Vehicles used just for agriculture, horticulture, and forestry e.g. tractors

How do I pay my car tax?

The simplest way to pay for road tax is online.

To do so, you’ll need a reference number from one of the following documents:

• A recent reminder (V11) ‘last chance’ warning letter from the DVLA
• Vehicle logbook (V5C) in your name
• A green, new keeper supplement (V5C/2) from a recently purchased car’s logbook.

The online system is very user-friendly, and you can pay with a debit card, credit card, or direct debit. Note that additional charges may apply for direct debit payments.

If you prefer not to pay online, you can call the DVLA’s 24-hour service at 0300 123 4321, although direct debit is not an option over the phone.

Alternatively, you can tax your vehicle in person at a Post Office that handles vehicle tax.

When do I have to pay my car tax?

If you own a vehicle, you will automatically receive a reminder before the tax is due to expire, which is always at the end of a given month.

Essentially, if your vehicle is taxed for 12 months from 1 January, you’ll need to renew before the end of December. You can tax a car for either six or 12 months.

What happens if I don’t tax my car?

If you are the registered keeper of an untaxed vehicle, you will receive a Late Licensing Penalty (LLP) letter. The fine is £80 but can be reduced to £40 if paid within 33 days. Failure to pay will result in the case being handed over to a debt collection agency.

Anyone found using or keeping an untaxed vehicle without a SORN (Statutory Off Road Notification)* will receive an Out of Court Settlement (OCS) letter.

The OCS amount is £30 plus one-and-a-half times the outstanding vehicle tax. If this remains unpaid, the case may be taken to a magistrates’ court, where penalties can be £1,000 or five times the amount owed, whichever is higher. This penalty rises to £2,500 if you are caught using or keeping an untaxed vehicle on a public road with a SORN in place.

In both scenarios, the vehicle may be clamped, and a £100 clamp release fee must be paid within 24 hours.

If the vehicle is removed, the fee increases to £200, with an additional £21 per day storage fee starting from the day it is taken to the vehicle pound.

Driving without car tax can lead to severe consequences, including fines up to £1,000. The police now use Automatic Number Plate Recognition (ANPR) cameras to check if a car is taxed since the tax disc is no longer in use.

*You need to declare a SORN when taking a vehicle ‘off the road’ to stop taxing and insuring it.

Quickfire summary: UK car tax changes in 2025

• Significant tax increases have been announced by Chancellor Rachel Reeves as a part of the Autumn budget for 2025, set to take place from 1 April onwards.
• Vehicle Excise Duty (VED) – also known as car tax or road tax – is an annual tax that vehicle owners in the UK must pay to legally drive on public roads.
• To determine your car’s tax band, check the V5C logbook for your vehicle and locate the date of first registration on the first page.
• Vehicle Tax Bands:
  • Cars registered after March 1, 2001: VED based on CO2 emissions, split into bands A (lowest) to M (highest).
  • Cars registered before March 1, 2001: VED based on engine size
• Electric Vehicles (EVs):
  • No longer tax-exempt from April 2025.
  • First-year charge: £10.
  • Annual flat rate: £195 from the second year onward.
  • EVs over £40,000: Additional £410 ‘showroom tax’ annually for the first five years.
• Petrol and Diesel Cars:
  • CO2 emissions 1-50 g/km: First-year tax from £10 to £110.
  • CO2 emissions 51-75 g/km: First-year tax from £30 to £130.
  • Vehicles emitting 76 g/km or more: First-year rates double.
  • Second-year rate remains at £190 annually.
• Hybrids:
  • Registered after April 1, 2017: Lose £10 annual VED discount, paying £195 per year.
  • Registered before 2017: Taxed based on CO2 emissions under older system.
• Benefit-in-Kind (BiK) Rates:
  • Increase by 1% each year from 2025 to 2028 for EVs.
  • Vehicles producing 75g/km of CO2 or more: 1% BiK increase from April 2025, remaining constant until at least 2028.
• Car Tax Rates Comparison (April 2025):
  • 0 g/km: £10 (first year), £195 (standard).
  • 1-50 g/km: £110 (first year), £195 (standard).
  • 51-75 g/km: £130 (first year), £195 (standard).
  • Over 255 g/km: £5,490 (first year), £195 (standard).
• Exemptions:
  • Classic cars over 40 years old.
  • Vehicles used by disabled drivers or to transport disabled passengers.
  • Mobility scooters, powered wheelchairs, invalid carriages.
  • Vehicles for agriculture, horticulture, forestry (e.g., tractors).
• How to Pay Car Tax:
  • Easiest way: Online using a reference number from V11, V5C, or V5C/2.
  • Alternative methods: DVLA’s 24-hour phone service (0300 123 4321) or in person at a Post Office.
• When to Pay Car Tax:
  • Reminders are sent before tax expires (end of the month).
  • Tax can be paid for six or 12 months.
• Penalties for Not Paying Car Tax:
  • Late Licensing Penalty (LLP): £80 (reduced to £40 if paid within 33 days).
  • Out of Court Settlement (OCS): £30 plus 1.5 times the outstanding tax.
  • Non-payment can lead to court action, fines up to £1,000 or higher, vehicle clamping, and additional fees for removal and storage.
  • ANPR cameras used to check car tax compliance.

Sources: RAC, Autotrader, Regit

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