Road tax, officially known as Vehicle Excise Duty (VED), is an essential consideration for vehicle owners across the UK. With changes set to take effect in April 2025, it’s crucial to understand how these updates might impact you. This article provides a breakdown of the upcoming changes and what they mean for motorists.
Key Changes to Road Tax in 2025
Introduction of Road Tax for Electric Vehicles (EVs):
From April 2025, zero-emission vehicles, including electric cars, will no longer be exempt from VED. New EV's registered from this date will now be subject to a first year 'showroom tax' subsequent annual tax.
Adjustment to First-Year Tax Rates:
First-year VED rates, also known as “showroom tax,” will see an increase across the board for combustion engined vehicles.
Changes to Standard Rates for Existing Vehicles:
The standard annual VED rate for cars, including petrol, diesel, hybrid, and electric models, will be adjusted to account for inflation and government policy shifts.
Why Are These Changes Being Made?
The government’s decision to extend VED to electric vehicles aligns with plans to ensure fair contributions from all road users and to support investment in road infrastructure. As EV adoption grows, the revenue generated from traditional fuel-powered vehicles decreases, necessitating this shift.
2024 vs. 2025 First-Year Tax Rates
The table below illustrates the differences in first-year VED rates based on CO2 emissions for Diesel cars (TC49) that meet RDE2 standard and petrol cars (TC48):
| CO2 Emissions (g/km) | 2024 First-Year Tax Rate (£) | 2025 First-Year Tax Rate (£) |
|---|---|---|
| 0 | £0 | £10 |
| 1-50 | £10 | £110 |
| 51-75 | £30 | £130 |
| 76-90 | £135 | £270 |
| 91-100 | £175 | £350 |
| 101-110 | £195 | £390 |
| 111-130 | £220 | £440 |
| 131-150 | £270 | £540 |
| 151-170 | £680 | £1,360 |
| 171-190 | £1,095 | £2,190 |
| 191-225 | £1,650 | £3,300 |
| 226-255 | £2,340 | £4,680 |
| Over 255 | £2,745 | £5,490 |
Note: These rates are illustrative and subject to confirmation in the 2025 Budget.
Rates for the Second Year Onwards
This payment comes into effect the second time the car is being taxed, or when it is a year old.
Alternative fuels include EV's, Hybrids, Bio Ethanol & LPG.
| Fuel Type | Single 12 Month Payment | 12 Monthly Direct Debit Payments | Single 6 Month Direct Debit Payment |
| Petrol/Diesel | £190 | £199.50 | £99.75 |
| Alternative | £180 | £189 | £94.50 |
Rates for cars with a list price over £40,000
Any car that has a list price exceeding £40,000 (including options) when new, incurs an additional 'luxury car tax' for 5 years.
The prices shown below are the total cost of the standard tax and luxury car tax combined.
| Fuel Type | Single 12 Month Payment | 12 Monthly Direct Debit Payments | Single 6 Month Direct Debit Payment |
| Petrol/Diesel | £600 | £630 | £315 |
| Alternative | £590 | £619.50 | £309.75 |
What Does This Mean for You?
If you’re considering leasing a new car, whatever the fuel type, the new 2025 will affect you if the car is delivered after the 1st April 2025. Contract Hire includes the cost of Road Tax for the duration of the agreement, therefore the lease costs will increase in line with the VED changes for the vehicle.
If you'd like to avoid these VED price changes, you would need to be looking at vehicles that are available for delivery before the end of March 2025. We have a huge selection of offers that can be delivered before the change, please contact our team today to discuss your requirements.
