Motorists are bracing for an average £418 increase in car tax come 2025, as significant changes to Vehicle Excise Duty (VED) are set to kick in from spring.
TaxNatives experts have issued a warning that petrol, diesel, and electric vehicle owners could be hit with steeper bills from April due to the comprehensive revisions. A hike in the standard VED rate is on the horizon, and even electric vehicles and hybrids will not be spared from the uptick in charges.
The most substantial change, however, lies in the first-year VED rates for high-emission cars, which are expected to soar, affecting nearly every driver within a few months. TaxNatives’ analysis forecasts that these changes could generate an additional £162.9 million in tax revenue in the first half of 2025 alone. This could result in drivers shelling out an average of £418 more for new vehicles, dealing a significant blow to their finances.
Andy commented: “The rise in Vehicle Excise Duty (VED) rates is part of the government’s plan to cut emissions, but it’s also adding financial pressure on drivers.
“If you’re buying a new petrol or diesel car – especially a higher-emission model – be prepared for a bigger hit to your wallet. These aren’t small increases; they’re significant costs you’ll need to budget for.”, reports the Express.
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First-year VED rates are set to double for many, adding thousands to the total cost of vehicle ownership. Cars emitting over 255 g/km of CO2 will face a hefty £5,490 fee just to hit the road in the first year during the 2025/26 tax period.
The cost for vehicle excise duty (VED) is set to soar from the existing £2,745 fee, as Labour plans to sharply raise rates to foster a transition to electric vehicles (EVs). Research by Go Compare reveals that diesel car owners will be hit hardest, with an anticipated hike averaging £1,113 per vehicle.
The purchase of petrol cars will entail an additional collective tax burden of £89.4 million. According to the research, this translates to an extra £503 per car under the impending changes.
Car insurance specialist at Go. Compare Tom Banks offered advice: “The increased VED rates mean most new car buyers will be paying a lot more than they were expecting in 2025.”
He suggested cost-effective alternatives: “For instance, consider purchasing a low-emissions car that will place your vehicle in the cheaper tax bands.”
Additionally, Banks mentioned another strategy for potential savings: “If you can’t purchase a suitable hybrid or EV, consider opting for a nearly new vehicle instead. This gives you that new car feeling for a fraction of the price, and will allow you to dodge the increased tax.