From 1 April this week, zero emission vehicles were no longer exempt from paying Vehicle Excise Duty (VED), helping stem some of the Treasury losses from the move to electric vehicle technology.
New zero emission vehicles that were first registered from 1 April 2025 will pay £10 for the first year up until 2029 and then begin paying the yearly standard rate from the second year of registration.
Zero emission cars first registered between March 2017 and March 2025 will pay the £195 standard rate when they renew their registration in 2025/26.
Older cars registered between March 2001 and March 2017 will pay £20 in 2025/26 because VED for cars first registered between those dates is calculated differently.
Zero emission motorcycles and light goods vehicles will start paying VED at the lowest possible rate for those vehicles.
The RAC has broken down other key tax changes coming in this week below:
- Although EVs registered after the 1 April date are only liable for a first-year rate of £10 until 2029, those that cost more than £40,000 will also have to pay the £425 a year 'Expensive Car Supplement', otherwise known as the luxury car tax.
- All cars emitting between 1-50 g/km of CO2 (that's most plug-in hybrids) will see the first year tax bill rise to £110. Currently hybrids in this band pay zero VED in the first year, while petrol and diesel cars pay £10.
- New cars emitting between 51-75g/km of CO2 will see VED increase from £30 (or £20 for hybrids) to £135.
- All other rates will double, meaning the owner of a new VW Golf 1.5 TSI pay an extra £220 in the first year. By contrast, a new BMW X5 M60i has had £2,745 added to the cost of the first-year rate.
This policy decision was made by the Conservative Government in the Autumn Statement 2022. Upon entering government in July 2024, the Labour Party did not signal a change from the Conservatives’ approach.
At Autumn Budget 2024, new the Government announced further measures relating to VED, including that the gap between the first-year VED rate for a zero-emission car and any other cars (including hybrid cars with relatively low carbon emissions) would increase, to maintain an incentive to purchase ZEVs.
This means the first-year rate for cars that emit any carbon emissions would increase by a higher proportion than that of zero-emission cars.
