Any change to VED (vehicle excise duty) is likely to cause cold sweats for motorists, and changes to 2025 car tax VED rates introduced by Rachel Reeves, Chancellor of The Exchequer, during the Autumn Budget will have some very real implications if you’re planning on buying a new car.
It remains one of the essential annual expenses associated with car ownership and can be a confusing topic to navigate with frequent adjustments to car tax bands over the years.
The Chancellor confirmed a shake-up of First Year Rates for VED for 2025. The First Year Rate – also known as the showroom tax – is a higher rate of tax paid on a brand-new car. Linked to carbon dioxide emissions, it had previously heavily favoured low and zero-emission cars, including hybrids.
In her Budget speech, Reeves said: ‘Labour wants to support the take-up of electric cars,’ which in turn has now led to much higher rates of First Year Rate VEDs on any car that’s not zero emissions.
You can find out how much a particular car costs to tax using Parkers’ car tax checker.
What are the new First Year Rates?
The new First Year Rates are as follows:
- Zero emission cars will pay the lowest rate at £10 until 2029-30.
- Rates for cars emitting 1-50 g/km of CO2, including hybrid vehicles, will increase to £110 for 2025-2026.
- Rates for cars emitting 51-75 g/km of CO2, including hybrid vehicles, will increase to £130 for 2025-2026.
- All other rates for cars emitting 76 g/km of CO2 and above will double from their current level for 2025-2026.
Will new car buyers notice much of a difference?
This is quite a drastic change from before. Previously zero emission vehicles enjoyed free First Year Rates, but a ten-quid rise isn’t going to ruin anyone’s day.
It’s the low-emission cars (including plug-in hybrids) that face a substantial price rise. Cars in the 1-50g/km of CO2 band used to pay £10, a sizable jump of £100. It’s the same jump for 51-76g/km of CO2 cars too, up from £30 to £130. This is a strong notion from the government that EVs are what they’re backing, and any emission-producing vehicle will be taxed more heavily going forward.
Cars that produce more than 76g/km of CO2 that’ll face the biggest brunt of costs. The figures are doubling, meaning everything from the tiny Hyundai i10 to a decidant Rolls Royce Phantom will have First Year Rates of VED doubled. Note that first-year VED charges are usually included in the monthly payment of car finance and leasing deals.
What about existing cars?
If you’re not buying a new car, you’ll be able to breathe a sigh of relief. The Chancellor announced that VED will be increasing in line with RPI (retail performance index). The ONS (Office for National Statistics) lists RPI at 2.6% for September 2024, but it may well fluctuate between now and April 2025.
Cars costing more than £40,000 attract VED car tax surcharge
Vehicles that cost more than £40,000 when new (after options) incur an extra annual charge of £410 (this has increased from £390) on top of the standard VED car tax rates, from their car’s second through sixth birthdays.
When the charge was introduced in 2017 it was largely only high-end, premium-brand cars that attracted it. However, recent inflation in new car prices means that many more mainstream models are liable for it, including top-spec Vauxhall Astras.
It’s even easier to get caught out when buying a used car. That’s because it’s often not clear what a car cost when it was new, especially as the £40,000 threshold takes the price of any optional extras into account. And most online car tax calculators don’t indicate if a particular car will incur the extra charge. Often the only way to find out is by starting the process of paying for road tax on the government’s website.
Classic car tax exemption
Vehicles built before 1 January of each calendar year become exempt from VED after 40 years. That means any car built during 1984 now doesn’t incur a charge; cars built in 1985 become exempt in 2025, and so on. Note that it isn’t an automatic process, and owners need to apply for the exemption.
Year one VED rates for cars registered on or after 1 April 2025
This payment covers your car for the first 12 months of its life, from the date it’s first taxed.
| CO2 (g/km) | Diesel cars (TC49) that meet RDE2 standard and petrol cars (TC48) | All other diesel cars (TC49) | Alternative fuel cars (TC59) |
| 0 | £10 | £10 | £10 |
| 1- 50 | £110 | £110 | £110 |
| 51 – 75 | £130 | £130 | £130 |
| 76 – 90 | £270 | £350 | £250 |
| 91 – 100 | £350 | £390 | £330 |
| 101 – 110 | £390 | £440 | £370 |
| 111 – 130 | £440 | £540 | £420 |
| 131 – 150 | £540 | £1,360 | £520 |
| 151 – 170 | £1,360 | £2,190 | £1,340 |
| 171 – 190 | £2,190 | £3,300 | £2,170 |
| 191 – 255 | £3,300 | £4,680 | £3,280 |
| 226 – 255 | £4,680 | £5,490 | £4,660 |
| Over 255 | £5,490 | £5,490 | £5,490 |
Rates for the second year onwards
This payment comes into effect from year two of the car’s life – in other words, from the second time it’s taxed.
Alternative fuel vehicles include hybrids, bioethanol and liquid petroleum gas.
| Fuel type | Single 12 month payment/by Direct Debit | Total of 12 monthly payments by Direct Debit | Single 6 month payment/by Direct Debit |
| Petrol or diesel | £190/£190 | £199.50 | £99.75 |
| Electric | £0/N/A | N/A | £0/N/A |
| Alternative | £180/£180 | £189 | £94.50 |
Rates for cars with a list price of more than £40,000
Cars that cost more than £40,000 new (including options) incur an extra charge of £410 for five years, starting when the car is taxed for the second time. The full charges are shown below.
| Fuel type | Single 12 month payment/by Direct Debit Diesel (RDE2)* and petrol | Total of 12 monthly payments by Direct Debit | Single 6 month payment/by Direct Debit |
| Petrol or diesel | £600/£600 | £630 | £315 |
| Alternative | £590/£590 | £619.50 | £309.75 |
A new car’s environmental credentials are made clear on an updated version of the government’s labelling system.
FAQs
Where can I tax my car?
Most people get their car tax direct from the ‘tax your vehicle’ section of the UK government website. It’s easiest if you can enter the reference number from your road tax reminder letter, otherwise you’ll have to enter a few details about your car for the system to find it. Either way, it’s a quick and easy process. At the payment stage, you can buy either six or 12 months tax and choose to spread the cost with monthly payments, or pay in a lump sum.
You can also still pay for road tax at your local Post Office. You’ll need to take your car’s V5C registration document, plus the MOT and insurance certificates to prove the car is legal. You don’t get a paper tax disc to show for the transaction anymore, but at least you’re interacting with another person.
How do I check my car tax?
You can do this at the ‘check if a vehicle is taxed’ section of Government website. Just enter your car’s registration – or that of any other car, for that matter – and you’ll be shown when its tax expires. The website also shows when the car’s MOT expires – MOT history is shown separately at the ‘check the MOT history of a vehicle’ web page.
How do I cancel my car’s UK road tax?
Car tax is no longer transferrable between owners. When you move your car on to a new keeper – or it leaves your possession for any reason – you need to cancel the tax when you inform the DVLA that it has changed hands. If you paid in full, you’ll be refunded for any remaining full months of tax. Direct Debit payments are cancelled automatically, so you’ll have to set up a new one when you get your next car.
How do you SORN a car?
It often happens that you may not be able to drive your car for a while. Perhaps it needs lengthy repairs, or you’re going travelling, or you’re just not able to drive. In those cases, you can put a statutory off-road notice (SORN) on your car, so you don’t have to pay road tax for the duration of that period. Parkers has a full guide on how to SORN your car.
If I buy a car, can the dealer tax it for me?
A dealer can still tax a car on your behalf online, over the phone or at a Post Office. To do so, they’ll need your name and address, and a code number from the New Keep Supplement part of the car’s V5C registration document. However, taxing the car is ultimately your responsibility, so make sure the dealer provides proof that they’ve sorted it out. Alternatively, you can always take care of it yourself.
Do I get a tax refund when I sell a car?
Road tax used to be transferrable between a car’s owners but that’s no longer the case. If you move your car on to a new owner – or scrap it – you need to cancel the tax. If you pay by Direct Debit, that’s done automatically when you inform of the DVLA of the new owner’s details.
Either way, any remaining full months of tax will be refunded. So, if you paid for 12 months road tax and sell the car three months into that period, you’ll receive a refund equivalent to nine months of road tax. Refunds are paid to the bank account details the DVLA has on record for you, so make sure they’re up to date.
Does paying for road rax by monthly Direct Debit cost more?
You can pay for road tax by Direct Debits taken out of your bank account every month. However, doing so adds to the cost. Pay monthly for 12 months tax and the cost goes up from £190 to £199.50 for a petrol or diesel car registered after 1 April 2017. Costs vary between different cars, which you can read about earlier in this article.
Curiously, paying for six months by Direct Debit is actually cheaper than making a one-off payment. But paying for 12 months in one lump sum is the most cost-effective option.
Do I still get road tax reminders?
The DVLA stills sends out road tax renewal reminders to a car’s registered keeper about one month before it expires. Known as a V11 document, it includes a 12-digit code that you can use to pay for your car’s road tax. You can also check your car’s road tax expiry date online.
What does First Year Rate mean for road tax?
For the newly registered car, you’ll pay a different form a VED known as the First Year Rate. This is based on the car’s CO2 emissions and is also called Year one VED rates.
This compares to the standard rate of VED, paid from the second year onwards. There have been several models of car tax and depending on the age of your car you’ll pay different rates. The current model (introduced in 2017) is a flat rate of £190 for petrol and diesel cars, and £180 for alternative-fuel cars (hybrids, LPG, CNG, biofuel). Under this model zero emission vehicles pay nothing.
Is first year road tax higher?
This depends on the emissions produced by the car. Under the model being introduced from April 2025, cars that produce 1-100g/km of CO2 will see that First Year Rates will be cheaper than the standard rate paid from the second year. Any car that produces more than 101g/km CO2 will see a reduction from the second year onwards. Everything from a Ford Puma to a Lamborghini Urus will pay less, with the higher the CO2 output, the bigger the decrease.
Zero emission vehicles registered from 1 April 2025 will have to pay £10 First Year Rates for VED. This then reduces to zero from the second time it’s taxed.
That is of course if the vehicle doesn’t cost more than £40,000. Then you’ll have to add a whopping £410 a year onto the tax bill for the five following years under the Expensive Car Supplement. From 2025 this will apply to all cars, including EVs for the first time.
Why is first year road tax so high?
First Year Rates are based on CO2 emissions, and the government has made it clear that it is trying to incentivise the adoption of EVs heavily, so heavily taxing polluting vehicles is a clear way of pushing people into EVs. In her Budget speech this October, Reeves said: ‘Labour wants to support the take-up of electric cars,’ which in turn has now led to much higher rates of First Year Rate VEDs on any car that’s not zero emissions.
EVs used to enjoy free VED in an attempt to incentivise adoption. This is now changing too, EVs will have to pay £10 First Year Rates. A small but notable increase as more EVs become more mainstream.
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