April 2025 car tax increase: Drivers to pay more for new petrol, diesel, and hybrid vehicles, how much

In the latest UK Budget, Chancellor Rachel Reeves said first year Vehicle Excise Duty (VED) is a tax levied on new cars, calculated based on their CO2 emissions. Currently, EVs are exempt from first-year VED charges, while petrol and diesel cars emitting between 111g and 150g of CO2 per kilometer pay £220, and those emitting over 255g/km pay £2,745.

Here’s what you need to know:

When does it start?

Starting in April, EVs will incur a £10 first-year VED fee for the first time, though this rate is frozen for the foreseeable future. Meanwhile, the rates for petrol, diesel, and hybrids will double or more. For example, a Ford Puma’s first-year VED will increase from £220 to £440. A Range Rover buyer will face a jump from £2,745 to £5,490 in their first year.

The Expensive Car Supplement, which applies an extra £410 annually for five years on vehicles costing over £40,000, will remain exempt for EVs, though this could change in the future.

Why is this happening?

The government’s goal is to accelerate the transition to EVs by widening the tax gap between high-emission vehicles and zero-emission alternatives.

Mrs Reeves said: “To help drive the transition to electric vehicles, the government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars.”

The move aligns with other measures to support EV adoption, such as maintaining favourable Company Car Tax rates and extending 100% First Year Allowances for zero-emission cars and EV charging points.

What does this mean for consumers?

Drivers of petrol, diesel, and hybrid vehicles will face significantly higher costs in the first year of ownership, potentially influencing their decision to switch to EVs. Meanwhile, EV buyers benefit from relatively low VED rates and continued tax incentives, making the transition to electric vehicles more financially appealing.