Budget tax rise will see some drivers fork out almost £5,500 next year

Some drivers are to see their car tax surge to almost £5,500 per year under new plans announced in the Budget this week.

Labour chancellor Rachel Reeves delivered her first Budget on Wednesday - confirming £40bn tax rises as she said the Government had to tackle the “scale and seriousness” of the situation inherited from the Conservatives to restore “stability to our public finances”. Alongside her speech to the Commons, the Treasury published a raft of documents alongside it - giving details on other updates and changes.

In these, the government confirmed it would raise the standard Vehicle Excise Duty (VED) rates - more commonly known as car tax - for cars, vans and motorcycles, in line with inflation, from 1 April, 2025. Car tax, a legal requirement for all vehicles registered in the UK, is paid every year.

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The first time you register your car, the rate you pay is based on your vehicle's CO2 emissions - and this is what is changing. Rates for cars emitting between one and 50 grams of CO2 per kilometre, including hybrids, will increase from £10 to £110 for 2025-26. Similar hikes will be seen for cars emitting 51-75g/km of CO2, the cost going from £30 to £130.

The biggest rise will be for owners of vehicles that emit 76g/km of CO2 and above, with rates 'doubling from their current level' for 2025-26. The lowest rate in this category-76-90g/km, which currently costs £135, so under the budget plans, they will have to pay £270.

UK drivers who buy the most polluting petrol and diesel cars (over 255g/km) from April 1, 2025, will need to fork out £5,490 - up from the current £2745 - when rates double next year.

Alongside this rise, the Budget also confirmed that first-year VED rate for new zero-emission vehicles will remain low at £10 until the 2029-30 tax year - although that is £10 more than what drivers currently pay. The budget document said the move came as it wanted to "strengthen incentives" to purchase zero emission cars.

The document read: "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."

Reacting to the Autumn Statement, Nicholas Lyes, director of policy and standards at IAM RoadSmart, said: "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."