Labour starts 100 day countdown until Rachel Reeves car tax hikes come in

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Drivers have been warned that they have less than 100 days until Rachel Reeves’s new Vehicle Excise Duty (VED) rates come into effect.

The changes, which come in on April 1, significantly impact first-year tax costs for all new vehicles, with some motorists seeing their bills more than double.


Even owners of low-emission hybrid vehicles, who currently pay nothing in their first year, will be required to pay £110 under the new system.

The tax increases, which were announced in the Autumn Budget last October, form part of a wider overhaul of the VED system that will affect all new cars registered from April 2025.

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Rachel Reeves and a car tax reminder

Electric car tax changes will come in for the first time in April

PA/DVLA

Under the new tax rules, for the first time, electric vehicles will also be brought into the VED system, ending their tax-free status impacting millions of motorists.

Hybrid car owners will be particularly affected by the new tax regime, with vehicles emitting between 1-50g/km of CO2 facing a significant increase in first-year charges.

Currently, most plug-in hybrids in this emissions band pay no VED in their first year – but they will be charged £110 from April.

The changes become even steeper for vehicles in the 51-75g/km CO2 band, with first-year tax rising from £30 (or £20 for hybrids) to £135.

These increases form part of the Government’s strategy to incentivise the uptake of fully electric vehicles. Conventional petrol and diesel car owners will also see their first-year tax rates double under the new system.

A typical family car like the Volkswagen Golf 1.5 TSI will cost an extra £220 in first-year tax compared to current rates, the RAC detailed. The increases are even more dramatic for larger vehicles with higher emissions.

Buyers of premium vehicles like the BMW X5 M60i will face an additional £2,745 on their first-year tax bill.

These substantial increases only apply to the first year after registration, with standard rates applying thereafter.

Beyond the first-year increases, standard VED rates will rise in line with the Retail Price Index (RPI) from April.

However, owners of premium vehicles face additional charges. Cars with a list price exceeding £40,000 when new must pay an extra £410 ‘premium car tax’ annually.

This premium rate applies for five years, starting from the second year after the vehicle was first registered. The combined effect means owners of expensive vehicles could pay up to £600 per year in standard VED charges.

The RAC explained: “Understanding car tax in the UK can be a confusing process. Road tax (or Vehicle Excise Duty, to use its official name) has changed substantially over the years and this can make it difficult to understand how much you need to pay in 2025.”

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Checking car tax online

Car tax hikes were announced at the Autumn Budget last year

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It added: “To complicate matters further, road tax rates are automatically adjusted by the Government in line with inflation. The most recent change was implemented on April 1 2024, with rates increased for the 2024/25 financial year. There are important rules you need to understand when it comes to buying or selling a vehicle, too.”

Drivers can easily check their tax band by referring to their V5C logbook, which shows the vehicle’s first registration date on page one.

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