Vehicle Exercise Duty will be rising in April next year(Image: Getty Images)

Car tax changes for 2025 as some drivers to be left with bill of almost £5,500

by · NottinghamshireLive

Under new plans revealed in this week's Budget, some drivers could see their car tax increase by nearly £5,500 a year. Rachel Reeves presented her first Labour Budget this week, and along with her parliamentary speech, the Treasury released a series of documents detailing further updates and changes.

The government announced in these documents that it would raise the standard Vehicle Excise Duty (VED) rates - also known as car tax - for cars, vans and motorcycles in line with inflation from April 1, 2025. Car tax is an annual legal requirement for all vehicles registered in the UK.

Tax must be paid when the vehicle is first registered, covering the car for the next 12 months. After this, vehicle tax is paid every six or 12 months at a different rate.

The initial registration rate is based on your vehicle's CO2 emissions, which is what's changing. Rates for cars emitting between one and 50 grams of CO2 per kilometre, including hybrid vehicles, will rise from £10 to £110 for 2025-26 for the first year.

Similar increases will be seen for cars emitting 51-75g/km of CO2, with the cost rising from £30 to £130, reports the Mirror.

The biggest increase in car tax rates will impact owners of vehicles that emit 76g/km of CO2 and above, with costs set to "double from their current level" for the 2025-26 period. As it stands, the lowest rate for this category, which covers emissions between 76-90g/km, is £135, but following the proposed budget plans, this will jump to £270.

Moreover, from April 1, 2025, those purchasing the highest polluting petrol and diesel vehicles—those emitting over 255g/km—will see the price soar to £5,490 from the present £2745 when rates double the following year. In a move to encourage the adoption of zero-emission cars, the Budget also announced that first-year VED rates for new zero-emission vehicles would remain at a low £10 until the 2029-30 tax year, albeit this is a £10 rise from the existing rate.

The budget statement expressed the government's aim to "strengthen incentives" for buying emission-free cars. It stated: "The government will change the VED First Year Rates for new cars registered on or after 1 April 2025 to strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine (ICE) cars."

Commenting on the Autumn Statement, Nicholas Lyes, IAM RoadSmart’s head of policy and research, remarked: "Increasing vehicle excise duty on all but zero emission vehicles in the first year will hit those buying new conventional vehicles in the pocket. A better solution to incentivise the take-up of electric vehicles would have been to cut VAT on the sale of new electric vehicles with a list price of £40,000 and under."