UK car tax changes 2025 - what you need to know
From 1st April 2025, free car tax will be a thing of the past. That's because new car tax changes are to be implemented from April 2025 in the UK. Find out everything you need to know below.
14 April 2025What are the new car tax changes?
Car tax can be a confusing topic for us here in the UK. In this article, we look at the car tax changes happening in 2025 and break down what you need to know for the changes coming in April 2025.
Car tax rates are something which motorists must think about regardless of whether you are a private car owner, business car owner, or vehicle fleet manager. This year, there are new car tax rules which all motorists need to be aware of; read on for more information or dive straight into the changes.
Electric car tax changes
The main point for drivers to note is that, when buying a new electric, zero or low-emission car, motorcycle or van from 1st April 2025, you will now pay for car tax, whereas previously there was no cost to tax your vehicle.
This also applies to those with car tax set to expire on or after 1st April 2025. Once your existing car tax has expired, the new rates will apply.
Note: if you are to tax your vehicle on 31st March 2025 and the existing tax runs until 31st March 2026, you won't get a free period but will need to pay a full year's tax.
To tax an electric car, EV owners already go through the same standard DVLA car tax process as other motorists. The only difference to this process now is that they will have to pay VED. To pay, there are a few a different options. You can:
- Make a one-off payment for six months' road tax
- Make a one-off payment for 12 months' road tax
- Pay by direct debit monthly instalments
You will be required to make a one-off payment for six or 12 months of road tax or pay in monthly instalments. Monthly instalments can be paid via a direct debit on the vehicle tax website, at a Post Office or by phone.
If you're looking to transfer road tax to a new owner when you're in the process of buying or selling an electric car, there are no changes to the current set-up, except for the new owners, who will need to tax the car from scratch. There are also no changes to registering an EV as off-road (SORN).
Road tax changes can be changed by the UK Government at any point. It's always recommended to check your vehicle's road tax band to get accurate rates for your car at that time.
While electric vehicle owners will now have to pay annual road tax, this shouldn't deter drivers from thinking about making the switch to electric.
At Arnold Clark, we have many great deals and incentives for customers looking for an EV as their next car.
Thanks to our partners at Bumblebee, home charging, often the preferred and most convenient method of charging for EV owners, is made simple, with their ability to install a home charger within 14 days.
Plus, with the roll-out of Arnold Clark Charge, our customers can take advantage of preferential rates andbookable charging slots at one of our 500 ultra-rapid chargers located across the UK.
DVLA electric car tax changes 2025
As of April 2025, the VED rules change for electric, zero or low-emission vehicles:
- Registered on or after 1st April 2025:
- From 1st April 2025, you will pay the first-year lowest rate of tax which is £10. Every year thereafter you pay the standard rate of £195 per annum.
- From 1st April 2025, if the list price of an EV is over £40,000, it will now incur the Expensive Car Supplement (ECS) charge of £410 per annum for the first five years.
- Registered between 1st April 2017 and 31st March 2025:
- From 1st April 2025, you will pay the standard tax rate, which is £195 per annum.
- Registered between 1st March 2001 and 31st March 2017:
- From 1st April 2025, these vehicles will shift to first band VED tax, which is £20 per annum.
Alternative fuel vehicle (AFV) and hybrid car tax changes
Previously, there had been an annual discount of £10 for hybrid and AFV vehicles. These tax changes mean that this discount will no longer be available. The tax rate for AFVs will now depend on the date on which the vehicle was first registered.
- If your hybrid or AFV was registered before 1st April 2017, the rate depends on the CO2 emission output.
- If the vehicle was registered on or after 1st April 2017 you will pay the standard rate of £195.
New petrol and diesel car tax changes 2025
The rates for petrol and diesel cars are also changing. Again, the rates depend on year of registration and CO2 emission output. Below is a breakdown of annual new car tax bands for cars registered on or after 1st April 2017:
| CO2 (g/km) | RDE2 standard petrol and diesel cars | All other diesel cars | Alternative fuel vehicles (AFVs) |
|---|---|---|---|
| 0 | £10 | £10 | £10 |
| 1 - 50 | £110 | £110 | £110 |
| 51 - 75 | £130 | £130 | £130 |
| 76 - 90 | £270 | £350 | £250 |
| 91 - 100 | £350 | £390 | £330 |
| 101 - 110 | £390 | £440 | £370 |
| 111 - 130 | £440 | £540 | £420 |
| 131 - 150 | £540 | £1360 | £520 |
| 151 - 170 | £1360 | £2190 | £1340 |
| 171 - 190 | £2190 | £3300 | £2170 |
| 191 - 255 | £3300 | £4680 | £3280 |
| 226 - 255 | £4680 | £5490 | £4660 |
| Over 255 | £5490 | £5490 | £5490 |
VED rates for cars registered between 1st March 2001 and 31st March 2017:
| Car tax band | CO2 emissions | VED rate (vehicles registered between 1st March 2001 and 31st March 2017) Alternative fuel vehicles (AFVs) |
|---|---|---|
| A | Up to 100 | £0 |
| B | 101 to 110 | £20 |
| C | 111 to 120 | £35 |
| D | 121 to 130 | £160 |
| E | 131 to 140 | £190 |
| F | 141 to 150 | £210 |
| G | 151 to 165 | £255 |
| H | 166 to 175 | £305 |
| I | 176 to 185 | £335 |
| J | 186 to 200 | £385 |
| K* | 201 to 225 | £415 |
| L | 226 to 255 | £710 |
| M | Over 255 | £735 |
If you're not buying a new car, your rate is only set to increase in line with inflation; the Chancellor announced this in the budget update near the end of 2024.
Search our stock of used carsThe Expensive Car Supplement (ECS)
Since 2017, registered keepers of cars with a list price of more than £40,000 when purchased from new are mandated to pay a surcharge on VED which is known as the Expensive Car Supplement (ESC).
The ESC surcharge is £410, which is paid each year for the first five years of ownership. Previously, EVs were exempt from this luxury car tax or ECS. As of 2025, that will no longer be the case.
However, at Arnold Clark, we have plenty of new electric cars under £40,000 for you to choose from if this is something you are concerned about when it comes to choosing your next car.
If you do end up purchasing a new car with a list price over £40,000, don't panic! We have broken the costs down for the first five years in the table below:
Cars registered on or after 1 April 2025 VED + ECS rates (first five years)
| CO2 (g/km) | CO2 (g/km)RDE2 petrol and diesel VED + ECS | All other diesel cars VED + ECS | AFVs VED + ECS | EV VED + ECS |
|---|---|---|---|---|
| 0 | £420 | £420 | £420 | £605 |
| 1 - 50 | £520 | £520 | £520 | - |
| 51 - 75 | £540 | £540 | £540 | - |
| 76 - 90 | £680 | £760 | £660 | - |
| 91 - 100 | £760 | £800 | £740 | - |
| 101 - 110 | £800 | £850 | £780 | - |
| 111 - 130 | £850 | £950 | £830 | - |
| 131 - 150 | £950 | £1770 | £930 | - |
| 151 - 170 | £1770 | £2600 | £1750 | - |
| 171 - 190 | £2600 | £3710 | £2580 | - |
| 191 - 255 | £3710 | £5090 | £3690 | - |
| 226 - 255 | £5090 | £5900 | £5070 | - |
| Over 255 | £5900 | £5900 | £5900 | - |
Benefit-in-kind tax (BIK)
It's not only private cars that are seeing a tax hike, either. The BIK rate for zero-emission vehicles will increase 1% per annum between 2025 and 2028. The rate currently sits at 2%, meaning it will increase to 3% come April 2025, 4% in April 2026 and 5% in April 2027.
For emission-producing vehicles (producing 75g/km), BIK will increase by 1% in April 2025 and stay at 1% until 2028. What will stay the same is the rising percentage scale based on CO2 emission output; this scale is capped at a maximum BIK of 37% for highly polluting vehicles (>170g/km CO2).
Double cab pick-up trucks
Another change for business and company car owners to be aware of is that, as of April 2025, double cab pick-ups that have a payload capacity of a tonne or more, like the Ford Ranger or Volkswagen Amarok, will now be classified as passenger cars rather than light commercial vehicles.
This means that these types of vehicles no longer receive light commercial vehicle tax discounts and the current benefit-in-kind (BIK) flat rate of £3,960 will no longer apply. This is quite a substantial change for business and company car owners to be aware of.
Please note, the transitional rules for existing owners mean that anyone in a lease or agreement for a double cab prior to 6th April 2025 will continue to be taxed as a van until whichever comes earlier: the end of the lease or 5th April 2029.
New car tax changes with real-life examples
It's April 2025 and time for a new car. You've got your heart set on a new EV and your budget is £45,000. You choose the new Škoda Enyaq iV for £42,565, so your car tax would be as follows:
- Year 1: £10 VED + £410 ECS = £420
- Year 2: £195 VED + £410 ECS = £605
- Year 3: £195 VED + £410 ECS = £605
- Year 4: £195 VED + £410 ECS = £605
- Year 5: £195 VED + £410 ECS = £605
- Year 6 and thereafter: £195 VED
Take another example: let's say you're stuck between two brand-new Kia Niro models, one is fully electric, the other is a petrol hybrid so the cost of road tax could help you make your decision. Both options have a list of under £40,000 so you don't need to worry about ECS.
| Kia Niro Electric | Kia Niro Hybrid |
|---|---|
| Year 1: £10 VED | Year 1: £370 VED |
| Every year thereafter: £195 | Every year thereafter: £195 |
Therefore, it would still cost you less in road tax to opt for the Kia Niro EV rather than the hybrid.
It's worth mentioning that you could also choose to lease a new car. When you choose to lease, your VED costs are built into your monthly rental agreement, which someone else deals with for you. If this sounds like something you would be interested in, check out Arnold Clark Leasing.
Car tax exemptions
Some drivers in the UK may be exempt from road tax, such as individuals with disabilities. Please ensure you check with the DVLA for the most accurate and up-to-date information on VED exemptions. Not taxing your vehicle without permission or a valid reason can lead to legal issues.
Conclusion
To conclude, these changes come into effect on 1st April 2025 and will impact motorists across the whole of the UK. The most significant change to note is that registered keepers of EVs, zero and low-emission cars, motorcycles and vans will now pay tax in the same way petrol and diesel car owners do, including the ECS surcharge.
