Owning a car in the UK is about to change. Starting April 1, 2025, the government will update the Vehicle Excise Duty (VED), which is also called car tax. This change affects all types of vehicles—petrol, diesel, hybrid, and even electric cars. The new rules aim to make the tax system fair for everyone, no matter what kind of car you drive.
Electric vehicle (EV) owners, who didn’t have to pay VED before, will now start paying it. Hybrids, which used to get small tax discounts, will lose that benefit too. Meanwhile, petrol and diesel cars—especially those that pollute more—will face even higher first-year tax rates. These changes are part of the government’s plan to support eco-friendly transport and maintain road funding.
If you own a car or plan to buy one soon, it’s important to understand how these changes will affect your wallet. You could save money by making smart choices before April 2025. Below, we break down everything you need to know in simple terms.
Why Are These Changes Happening?
The UK government has three main reasons for changing the VED system:
- To Keep Things Fair: As more people drive electric cars, the government wants every driver to help pay for roads and repairs.
- To Encourage Cleaner Cars: Higher taxes on high-emission vehicles push people toward low-emission or electric options.
- To Maintain Tax Income: Fewer petrol and diesel cars mean less VED money. The new rules help keep income stable.
What This Means for Vehicle Owners
Electric Car Drivers
Until now, electric cars were tax-free. Starting April 2025, that changes:
- First-year tax: £10
- After the first year: £195 annually
- Cars priced over £40,000: Extra £425 yearly for five years
Example: If you buy an EV for £45,000 in May 2025, you’ll pay £10 in year one, then £620 each year for the next five (including the extra fee).
Petrol and Diesel Car Owners
High-pollution cars will cost a lot more in tax:
- For cars that emit over 255g/km of CO₂: First-year tax jumps to £5,490
- After that: £195 annually
Example: A petrol car with 160g/km CO₂ now pays £1,360 in the first year instead of £680.
Hybrid Vehicle Owners
Hybrids used to get a small £10 discount. This will end in April 2025.
- Now, they will pay the same tax as petrol/diesel cars: £195 yearly
- Expensive hybrids (over £40,000) will also pay the £425 extra
Example: A hybrid car that used to cost £185 per year will now cost £195, plus £425 more if the car is high-end.
Tips to Lower Your Car Tax in 2025
You can still take action before the rules change:
- Own an EV already? Renew your tax before April , 2025, to save £195 for another year.
- Thinking of buying an EV? Do it before April to avoid the new taxes.
- Petrol/Diesel Driver? Look for low-emission models to reduce your tax bills.
- Hybrid Owner? Budget for the full tax rate and possible extra fees if your car is expensive.