Motorists are bracing themselves for a hike in car tax bills as a major overhaul of Vehicle Excise Duty (VED) is set to kick in within days.
From April 1, drivers of petrol, diesel and electric cars will be hit with new rates, with most increasing in line with Retail Price Index (RPI) inflation, while some will face additional charges.
The biggest increase will be seen in first-year VED tax rates, particularly affecting those driving the most polluting petrol and diesel models. Traditionally, motorists have paid more VED tax in a vehicle’s first year on the road, with the standard rate applied after 12 months.
However, first-year VED rates are set to double for cars emitting over 75g/km of CO2, potentially adding thousands of pounds to total bills, with some drivers facing costs of almost £5,500.
Finance experts at Pete Barden explained: “Starting from April 1, 2025, the UK’s Vehicle Excise Duty (VED) rates for new cars are set for a major overhaul, with significant increases in first-year rates for certain vehicle emissions categories.”
The government has justified these changes as a means to “strengthen incentives” for choosing zero-emission and electric vehicles by widening the cost gap between electric, hybrid, and internal combustion engine (ICE) vehicles, reports the Express.
Petrol and diesel cars emitting over 255g/km of CO2 will see their first-year VED bills rise from £2,745 per year to £5,490 from April.
The taxman has served a notice that gas-guzzlers will feel the pinch as car taxes soar for high emissions vehicles, with those emitting between 226 and 255g/km of CO2 facing a hike from £2,340 to £4,680. In the same vein, cars churning out 191 to 225g/km of CO2 are set to be hammered with a £3,300 yearly fee, up from the current £1,650.
HM Revenue and Customs articulated their position, stating that such measures would accentuate the cost gaps among electric, hybrid and traditional fuel cars.
HMRC said: “Vehicle Excise Duty first-year rates are paid for the first year of a car’s lifecycle, at the point of registration, and vary based on emissions.
“From 1 April 2025, the Vehicle Excise Duty first-year rates will be changed to widen the difference between zero-emission, hybrid and internal combustion engine cars.”
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