Upcoming Changes to UK Vehicle Excise Duty (VED) Effective April 1, 2025

Starting April 1, 2025, the UK government will implement significant changes to Vehicle Excise Duty (VED), affecting both new and existing vehicle owners. These adjustments aim to promote environmental sustainability by encouraging the adoption of low-emission vehicles and ensuring a fair contribution from all vehicle types.​

Key Changes to VED:

1. Introduction of VED for Electric Vehicles (EVs):

   • New EVs Registered on or after April 1, 2025: These vehicles will incur a nominal VED charge of £10 in the first year, increasing to the standard annual rate of £195 from the second year onwards.

   • Existing EVs Registered between April 1, 2017, and March 31, 2025: Owners of these vehicles will begin paying the standard annual rate of £195 starting April 1, 2025. 

   • Older EVs Registered between March 1, 2001, and March 31, 2017: Previously exempt, these vehicles will now be subject to a £20 annual VED charge. ​

2. Adjustments for Plug-in Hybrid Vehicles:

   • First-Year VED Rates: Vehicles emitting between 1-50 g/km of CO₂ will see an increase in the first-year tax to £110, up from the previous zero rate. ​

   • Subsequent Years: These vehicles will be taxed at the standard annual rate of £195.​

3. Increased VED for High CO₂-Emitting Vehicles:

   • First-Year Rates: Vehicles emitting over 255 g/km of CO₂ will face a first-year VED of £5,490, a substantial increase aimed at discouraging the use of high-emission vehicles. 

4. Luxury Car Supplement:

   • Applicability: All vehicles, including EVs, with a list price exceeding £40,000 will be subject to an additional annual charge of £425 for five years, starting from the second year of registration. ​

5. Benefit-in-Kind (BiK) Tax for EVs:

   • Incremental Increases: The BiK tax rate for EVs will rise from 2% to 3% starting April 6, 2025, with planned annual increases reaching 9% by the 2029/30 tax year. ​

6. Fuel Duty Freeze:

   • Extension: The existing freeze on fuel duty, including the five pence per litre cut, will remain in effect until March 22, 2026, aiming to manage fuel costs for consumers. ​

     
     

Implications for Vehicle Owners:

• EV Owners: While EVs will no longer be entirely exempt from VED, they will still benefit from lower rates compared to high-emission vehicles.​

• Prospective Buyers: Individuals considering purchasing new vehicles, especially those with high CO₂ emissions or a list price over £40,000, should anticipate higher VED costs.​

• Fleet Managers: Businesses managing vehicle fleets should reassess their strategies to account for the new VED rates and BiK tax changes, potentially increasing the appeal of low-emission vehicles.​

  
  

Conclusion:

The forthcoming VED changes reflect the UK government's commitment to environmental sustainability and equitable taxation across all vehicle types. Vehicle owners and prospective buyers are advised to familiarize themselves with these changes to make informed decisions and understand the financial implications associated with vehicle ownership post-April 2025.​