Last Updated on: August 7, 2026

The new car tax rates 2025 ended free Vehicle Excise Duty for electric cars and doubled first-year rates on higher-emission petrol and diesel models. As of the 2026/27 tax year, the standard annual rate is £200, EVs pay £10 in year one, and cars over £40,000 (£50,000 for EVs) pay a £440 annual supplement for five years.

Key takeaways 

• Electric vehicles lost their VED exemption on 1 April 2025 and now pay £10 in year one, then the £200 standard rate from year two onward.
• The Expensive Car Supplement is £440 a year for five years, applying above £40,000 for petrol and diesel and above £50,000 for electric cars.
• First-year VED for the highest-emitting cars now reaches £5,690, more than double the equivalent rate before the 2025 reform took effect.
• A confirmed pay-per-mile eVED charge starts 1 April 2028: 3p per mile for electric cars and 1.5p per mile for plug-in hybrids, on top of VED.

What are the new car tax rates 2025?

The new car tax rates 2025 represent a comprehensive overhaul of how the DVLA collects road revenue, primarily targeting the growing population of zero-emission vehicles.

Previously, electric cars enjoyed a £0 VED rate as an incentive for adoption; however, from April 2025, these vehicles will be brought into the standard tax bands. This includes a £10 first-year rate for brand-new EVs and a jump to the standard annual rate of £195 for any EV registered since 2017.

The Genesis of the 2025 Reform

These changes were originally set in motion during the 2022 Autumn Statement but were reinforced and expanded during the Autumn Budget 2024 by Chancellor Rachel Reeves. The primary legislative why behind the new car tax rates 2025 is to plug a growing fiscal gap.

As more drivers switch from fossil fuels to electricity, the Treasury faces a multi-billion pound shortfall in fuel duty and VED revenue.

This fiscal shift also aligns with a tightening of HMRC rules regarding corporate vehicle benefits; while many directors still look to can you write off a car as a business expense in UK, the tax relief for high-emission models has been significantly curtailed to favor electrification.

The Shift to Universal Taxation

The core truth of this reform is the end of incentive-based taxation. While the government still encourages EV adoption through grants and charging infrastructure investment, the 2025 rules signal that all vehicles, regardless of tailpipe emissions, must now pay to keep the road network operational.

The time period for these rates begins for any renewal or new registration processed on or after 1 April 2025.

How do the 2025 rates differ from the old car tax system?

Understanding the difference between the new car tax rates 2025 and the previous old rates is vital for budgeting. Historically, VED was a binary system: high-polluters paid heavily, and zero-emission vehicles paid nothing.

The 2025 system narrows this gap significantly by introducing a floor for all vehicles while simultaneously raising the ceiling for the most polluting cars.

Old vs. New: A Direct Comparison

The most stark difference between old car and new car type price structures is found in the first-year Showroom Tax.

For a petrol car emitting 151-170g/km of CO2, the first-year rate has historically hovered around £680. Under the 2025 rules, this doubles to £1,360. Meanwhile, electric cars jump from £0 to a £10 first-year rate and then to £195 annually.

These compounding costs mean that households with a net income of around £40k after tax UK may find the upfront on the road price of a new petrol vehicle considerably more impactful on their annual budget.

From the second year onwards, every fuel type pays the same £200 standard rate, with an extra £440 a year for five years on cars listed above £40,000 (£50,000 for EVs).

8 Steps to Calculate Your 2025 Tax Liability

Motorists can estimate their 2025 liability by following these steps:

1. Locate your vehicle’s CO2 emissions figure (found on your V5C logbook).
2. Confirm the date of first registration to see which era of VED applies.
3. Check the List Price including all factory-fitted options and VAT.
4. Identify if your vehicle is Electric (EV), Hybrid, or Internal Combustion (ICE).
5. For new ICE registrations, double the previous 2024 first-year rate band.
6. For EVs, apply the new £10 first-year rate or the £195 standard rate for existing cars.
7. Add the £425 Expensive Car Supplement if your EV is over £50,000 (ICE over £40,000).
8. Verify if your vehicle qualifies for the Disabled or Historic (40+ years) tax class.

Winners and Losers: Which car prices are affected?

The new car tax rates 2025 do not impact all motorists equally. In practice, the system has been engineered to protect mid-market EV buyers while penalizing high-end luxury combustion vehicles.

For an individual bringing home roughly £60k after tax UK, the 2025 system actually offers a strategic window: by opting for an EV under the revised £50,000 threshold, they can secure a premium vehicle while side-stepping the punitive rates applied to luxury combustion SUVs.

Car Type	Impact Severity	Primary Reason
Mid-Range EVs (£40k–£50k)	Positive (Winner)	The Expensive Car threshold rose from £40k to £50k specifically for EVs.
Used EVs (2017–2025)	Negative (Loser)	Owners go from paying £0 to £195 per year.
High-Emission SUVs (>255g/km)	Significant (Loser)	First-year registration tax has doubled to over £5,490.
City Cars (<100g/km)	Moderate	Small petrol cars lose their £0 first-year status and move to £110+.

The £50,000 EV Threshold

A common pattern in recent years was that even standard electric family cars were being hit by the Luxury Tax because they cost slightly over £40,000.

One of the most significant benefits of the 2025 changes is that the government increased this Expensive Car Supplement threshold to £50,000 for electric vehicles.

This move effectively reduces the annual tax burden for roughly one million motorists by £425 per year compared to the previous limits.

ven for those in the higher-rate bracket earning £80k after tax UK, the elimination of this luxury surcharge on mid-market EVs represents a welcome reduction in total ownership costs over a five-year period.

Advantages and Disadvantages of the New Tax Rates 2025

The public reaction to the new car tax rates 2025 has been polarized. While some see it as a necessary step for economic stability, others view it as a stealth tax on green transition.

Advantages	Disadvantages
Infrastructure Funding: Generates revenue to repair potholes and maintain the road network.	Cost of Living: Adds an average of £195 in new annual costs for existing EV owners.
Fairness: Ensures all road users contribute, regardless of their engine technology.	Incentive Removal: Reduces the financial gap that encouraged people to ditch petrol.
EV List Price Relief: Raising the luxury threshold to £50k makes premium EVs more accessible.	High Entry Costs: Doubled first-year rates increase the on-the-road price of new cars.
Climate Alignment: Maintains a high tax barrier for the most polluting luxury vehicles.	Complexity: Multiple thresholds and date-based rules make calculations difficult.

Impact on Insurance and Other Products

The impact of the new VED framework extends beyond the tax disc and into broader ownership costs. When VED rates rise, insurance companies often adjust premiums to reflect the higher value of total loss payouts (which include unused tax).

It is also a pertinent time for motorists to review their policy fine print—not just for price increases, but for technicalities such as If I have fully comprehensive car insurance can i drive any car, as ensuring both tax and insurance remain valid is critical for legal road use in 2025.

Furthermore, the 12% Insurance Premium Tax (IPT) remains, and when combined with higher VED, the monthly cost of keeping a car on the road is trending upward for the 2025/26 cycle.

How can UK motorists benefit from the 2025 changes?

While the word tax rarely suggests a benefit, savvy motorists can navigate the new car tax rates 2025 to their advantage. How UK people get benefits from these changes often comes down to timing and selection.

• The Registration Window: Registering a new electric vehicle before 1 April 2025 locks in the final year of £0 VED, saving £195 in the short term and avoiding the Expensive Car surcharge for an extra year.
• The £50k Buffer: By choosing an electric model with a list price of £49,999, you save £2,125 over five years compared to a petrol car of the same price.
• Used Market Arbitrage: Electric cars registered before 2017 only pay £20 a year under the new rules. This makes Gen 1 EVs like early Nissan Leafs or BMW i3s incredibly cost-effective for city commuting.

Future-Proofing: 2026, 2028, and Beyond

The government has signaled that the new car tax rates 2025 are just the beginning. From April 2026, rates are expected to rise again in line with the Retail Price Index (RPI), likely pushing the standard rate toward £200.

Even more significant is the 2028 Roadmap. The Treasury is currently consulting on an Electric Vehicle Excise Duty (eVED) which could introduce a pay-per-mile system.

Early projections suggest 3p per mile for EVs and 1.5p for hybrids, aimed at replacing the £25 billion lost from fuel duty annually.

Accountability and Complaints

If you believe your vehicle has been wrongly banded under the new car tax rates 2025, you can raise a complaint.

You should first contact the DVLA’s vehicle tax service via the GOV.UK portal. For disputes regarding the List Price used for the Expensive Car Supplement, you must contact the manufacturer or the original dealership to verify the technical data sent to the DVLA.

How Do the New Car Tax Rates Impact Small and Medium Enterprises (SMEs)?

The 2025/2026 car tax reforms raise SME operating costs by ending EV tax exemptions, doubling first-year showroom taxes on high-emission vehicles, and applying multi-year luxury surcharges to company cars exceeding corporate price thresholds.

• Fleet Cost Escalation: ICE utility vehicles face significantly higher first-year VED, increasing initial capital expenditure.
• Company Car Budgeting: Business EVs now incur standard annual rates plus potential surcharges, altering total cost of ownership models.
• Threshold Compliance: Procurement teams must keep business EV list prices under £50,000 to avoid luxury vehicle penalties.
• Future Overhead Planning: Service-heavy SMEs must account for upcoming mileage-based tracking and charges in transport budgets.

Conclusion

The introduction of the new car tax rates 2025 marks the end of free motoring for electric car owners and a significant cost increase for those buying high-emission vehicles.

To mitigate these costs, buyers should aim to register new vehicles before the 1 April 2025 deadline where possible. For those going electric, keep your List Price under £50,000 to avoid the £425 annual surcharge.

Your next step should be to check your vehicle’s current tax expiry date on the DVLA website to prepare for the 2025 price adjustment.

Disclaimer: This article is for informational purposes only and does not constitute formal financial or legal advice. Please consult the GOV.UK portal or a qualified professional for official tax guidance.

FAQ

What is the new car tax regime in 2025?

From 1 April 2025, electric vehicles lost their VED exemption and now pay tax like petrol and diesel cars, while first-year rates on higher-emission combustion vehicles roughly doubled. The system has since had one further RPI uprate, effective April 2026.

How much tax do you pay on a new car in the UK?

It depends on CO2 emissions and fuel type: £10 for zero-emission cars up to £5,690 for the highest-emitting non-RDE2 diesels in year one, then a flat £200 standard rate from year two, plus £440 a year for five years on cars listed above £40,000 (£50,000 for EVs).

What will my car tax be in 2026 in the UK?

For the 2026/27 tax year, most cars pay the £200 standard rate from their second year of tax, with first-year rates set by CO2 band and an additional £440 supplement for higher-value vehicles. Rates next change on 1 April 2027.

What are the UK car tax bands?

UK car tax bands are based on CO2 emissions at first registration, ranging from 0g/km (£10) to over 255g/km (£5,690), with a flat £200 standard rate applying to every fuel type from the second year of ownership onward.

Do electric cars still pay less tax than petrol cars overall?

Yes, for now. Even with VED and rising BIK rates, electric cars remain cheaper to tax than equivalent petrol or diesel cars, though the gap will narrow from April 2028 once the pay-per-mile eVED charge takes effect.

What is eVED and when does it start?

eVED (Electric Vehicle Excise Duty) is a confirmed pay-per-mile charge starting 1 April 2028, adding 3p per mile for electric cars and 1.5p per mile for plug-in hybrids on top of existing VED, based on self-reported and MOT-verified mileage.

Do I need to do anything if I already own an electric car?

If your EV was registered before 1 April 2025, check its exact registration date, it’s permanently exempt from the Expensive Car Supplement regardless of value, which is worth confirming with the DVLA if you’re unsure.