Road Tax increases of up to £2,750 This April – 2025 April Statement
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Have you heard about the upcoming changes to Vehicle Excise Duty (VED), commonly known as road tax? Many drivers may not realize that significant updates are on the horizon. Starting in April 2025, some motorists could face a hefty £2,750 tax bill increase, while electric vehicle (EV) owners will be required to pay VED for the first time. This means that buyers of new cars can expect a higher showroom price. Alongside this, the luxury car tax (expensive car supplement) is increasing.
According to a poll by WeBuyAnyCar, as many as three-quarters of drivers are unaware of these upcoming tax changes. In this blog, we’ll dive into the details of the new tax rules, including who will be affected and explore potential ways to lower your tax bill for the coming year.
When Did These Changes Happen?
Some of the changes to VED were announced last year in Chancellor Rachel Reeves' Autumn Budget, however, changes affecting EVs were confirmed in 2022 under the previous Conservative government and will continue under the current government.
These increased car taxes are expected to generate an additional £400 million per year for the Treasury, as noted by Reeves during her statement in October.
It is worth noting that this will only affect drivers buying new cars, and not those already driving and taxing their used vehicles.
What will you pay in EV tax from April? EV Car Tax Changes
The new statement - set to shake up the way EVs, and traditional cars are taxed - will lead to several changes around the cost of owning an electric car. These new taxes include VED (road tax) for electric cars, luxury tax for new electric cars costing over £40,000, and the increase in benefit-in-kind rates from 2% to 3% for those leasing their car through a scheme like EV salary sacrifice.
Let’s compare the cost of a luxury EV tax bill in 2024, and the EV tax changes from April 2025.
These calculations use a BMW iX - one of the more expensive EVs.
| 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |
|---|---|---|---|---|---|---|
| Benefit-in-Kind Tax Annual (%) | £560.64 (2%) | £840.96 (3%) | £1,121.28 (4%) | £1,401.60 (5%) | £1,962.24 (7%) | £2,522.88 (9%) |
| VED/ Road Tax | £0 | £10 | £195 | £195 | £195 | £195 |
| Expensive Car Supplement | £0 | £425 | £435 | £435 | £435 | £435 |
| Total Tax Bill | £560.64 | £1,275.96 | £1,751.28 | £2,031.60 | £2,592.24 | £3,152.88 |
Let’s compare the cost of a cheaper EV tax bill in 2024, and the EV tax changes from April 2025.
These calculations use a Mini Cooper Electric - a car that will not attract the Luxury/Expensive Car Supplement.
| undefined | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 |
|---|---|---|---|---|---|---|
| Benefit-in-Kind Annual (%) | £240.96 (2%) | £361.44 (3%) | £481.92 (4%) | £602.40 (5%) | £843.36 (7%) | £1,083.36 (9%) |
| VED/ Road Tax | £0 | £10 | £195 | £195 | £195 | £195 |
| Expensive Car Supplement | £0 | £0 | £0 | £0 | £0 | £0 |
| Total Tax Bill | £240.96 | £371.44 | £676.92 | £797.40 | £1,038.36 | £1,278.36 |
As you can see, there will be significant tax increases for electric vehicles under the new statement from April the 1st - however petrol and diesel cars are expected to be hit hardest. The crucial differences between EV and petrol/diesel tax regimes is the fact that EVs will not be paying showroom tax - which is expected to contribute to increases of up to £2,745 for some drivers.
Additionally, for drivers leasing their EVs through salary sacrifice - benefit-in-kind rates are flat for all EVs, meaning that it will be 3% next year regardless of the cost of the electric car. This is different with petrol/diesel - where the maximum BiK rate is 37%.
This means that buying or leasing an EV will still lead to significant savings - which we break down below.
EVs to pay road tax for the first time
One of the benefits of switching to an electric vehicle (EV) was the exemption from VED (road tax). Although EVs will no longer be exempt from this tax - the rate remains much lower than that paid by drivers of new petrol, and diesel cars.
For buyers of new electric cars (from 1 April 2025) - the first year VED rate will be £10 - rising to the standard rate of car tax in the second year of ownership. The showroom tax is likely to be retained until 2029-30 to nudge drivers towards cleaner cars, with the Labour party following its manifesto promise to ban the sale of new petrol and diesel cars in 2030.
In the second year of ownership, EV road tax will increase to the standard rate - currently set at £190, rising to £195 in April.
EV Tax Regime (from 1st April 2025)
| CO2 (g/km) | First-year VED | Year 2+ |
|---|---|---|
| 0 (EV) | £10 | £195 |
For drivers of existing electric cars registered between 1 April 2017 and 31 March 2025, the standard tax rate of £195 will apply.
Early EV adopters will face the lowest tax increase - paying just £20 in annual VED for EVs registered before the 31st of March 2017.
EVs to pay the ‘expensive car supplement’
New electric cars priced at over £40,000 will attract the ‘expensive car supplement’ from the 1st of April - costing £420 a year for the first 5 years of ownership, as confirmed by the DVLA.
This could impact a significant number of new EV models - and will mean that some drivers of new EVs could be paying as much as £620 for tax, in their second year of ownership (standard rate + expensive car supplement).
Although this is a much lower rate than what many petrol and diesel cars will be subject to - it is worth noting that drivers will not be able to avoid this tax by negotiating a discount on their £40,000+ EV to bring it under the threshold, as this tax is applied based on RRP - not the final price paid.
The Luxury Car Supplement
The luxury car supplement will increase from £410 to £425 annually, as all VED rates adjust each year according to the Retail Price Index. This will be in addition to the standard VED rate, which is rising to £195, from £190. As a result, you'll be paying a total of £620 per year from years two to six, amounting to an extra £3,100 in VED over six years. This increase will impact cars priced at over £40,000.
With the current average EV price of over £40,000, many electric cars will also be subject to the luxury car tax - alongside a £10 first-year tax, followed by the standard VED rate after. Luxury internal combustion engine (ICE) cars that are new from the showroom will also pay a showroom tax of up to £5,490, depending on their level of emissions.
This is designed to incentivise the switch from luxury petrol and diesel cars to luxury EVs - with a substantial disparity between their tax rates within the first five years of car ownership - likely to affect many luxury car drivers that drive new or nearly-new cars.
How to reduce your tax bill
Despite the changes to EV tax rates, switching to an electric car is still the best way to save money on your new car lease. When it comes to high-end cars, making the switch is a no-brainer. Comparing the taxes associated with leasing a high-end petrol vs an electric car, you could save several thousands in tax alone.
Luxury Car Example
When comparing a petrol BMW X5 to its electric counterpart - the BMW iX - the approximate tax savings come to an eye-watering £14,805.04 in the first year of ownership.
| BMW X5 (Petrol) | BMW iX (Electric) | |
|---|---|---|
| Benefit-in-Kind Tax Annual (%) | £10,166 (37% rate) | £840.96 (3% rate) |
| Road Tax (VED - year 1) | £5,490 | £10 |
| Expensive Car Supplement | £425 | £425 |
| Total Tax Burden | Approx. £16,081 | Approx. £1,275.96 |
The X5 has an RRP of £68,695 and iX has an RRP of £70,080. The tax estimate is built around a higher rate (40%) tax payer and the cars’ RRP respectively.
The BMW iX Estate can be leased through our salary sacrifice scheme for around £716 a month. Find out more about BMW electric cars here.
Non-luxury Car Example
When comparing cars priced at under £40,000 - such as the all-electric Mini Cooper, and its petrol counterpart - you could save around £2,820 in tax.
| Mini Cooper (Petrol) | Mini Cooper (Electric) | |
|---|---|---|
| Benefit-in-Kind Tax Annual (%) | £2,922 (32% rate) | £361.44 (3% rate) |
| Road Tax (VED - year 1) | £270 | £10 |
| Expensive Car Supplement | n/a | n/a |
| Total Tax Burden | Approx. £3,192 | Approx. £371.44 |
The Mini Cooper (Petrol) has an RRP of £23,270 and Mini Cooper (Electric) has an RRP of £30,120. The tax estimate is built around a higher rate (40%) tax payer and the cars’ RRP respectively.
The Mini Cooper Electric can be leased through our salary sacrifice scheme for around £286 a month.
New Petrol, Diesel, and Hybrid Cars - New Tax from April 2025
The upcoming changes (1st of April) will see tax on new petrol, diesel, and hybrid cars double, affecting their on-the-road price in their first year of operation. This means that the most polluting vehicles will see a tax bill of up to £5,490, as confirmed by the October Budget.
This means that petrol, diesel, and hybrid cars emitting more than 76g/km CO2 will see their first-year tax bill doubled.
Cars - typically hybrids - emitting lower CO2 volumes of 50-75g/km CO2 will pay up to £130, and cars emitting 0-50g/km CO2 will pay £110.
New electric cars (EVs), which previously paid £0, will now pay £10.
Showroom Tax Prices
| CO2 (g/km) | Current Price: Petrol/ Diesel | Price from 1 April 2025: Petrol/Diesel | Current Price: Hybrid | Price from 1 April 2025: Hybrid |
|---|---|---|---|---|
| 1-50 | - | - | £0 | £110 |
| 51-75 | - | - | £20 | £130 |
| 76-90 | £135 | £270 | £125 | £250 |
| 91-255 | Price Doubled | Price Doubled | Price Doubled | Price Doubled |
| 255+ | £2,745 | £5,490 | £2,735 | £5,490 |
Is the Spring Statement different from a Spring Budget?
The Spring Statement, also known as the “mini-budget”, is one of two announcements made by HM Treasury to Parliament. This is done after the publication of economic forecasts - with the second such event being the Autumn Statement, presented later in the year. Both usually involve speeches by the Chancellor, in the House of Commons.
Whereas a budget is designed to outline future plans, based on new policies adjusting for projections, and past performance of the economy - a statement serves as a “check-in” to address the government’s priorities in the coming six months. Changes to policy can still be made - as seen above - but they do not present a radical step-change from the overall status-quo.
In 2020, the Spring Statement was upgraded to a full budget, after the cancellation of the Autumn 2019 Budget announcement. In 2021, the Spring Statement was also replaced by a full budget.
Is going electric still worth it in 2025?
The upcoming changes to Vehicle Excise Duty (VED) from 1 April 2025 will significantly impact drivers of new petrol, diesel, and hybrid cars, with some facing tax increases of up to £2,750 in the first year.
While this may seem like a hefty price to pay, there are still opportunities to reduce your tax burden - particularly by opting for an electric vehicle (EV), which remains a more affordable choice despite the introduction of a £10 first-year VED and the eventual standard tax rate.
Additionally, the switch to an EV offers substantial long-term savings, especially for high-end models like the BMW iX, where tax savings can reach over £15,000 in the first year alone, although more affordable EVs will still attract a good amount of tax savings.
Although the new tax regime introduces additional costs, it also aligns with the UK’s efforts to encourage cleaner, more sustainable vehicles. For those in the market for a new car, it's important to be aware of these changes, plan accordingly, and take advantage of the financial benefits that come with choosing an electric vehicle - especially through salary sacrifice schemes.
With the government’s plans to phase out petrol and diesel cars by 2030, now may be the perfect time to make the switch and reduce your tax liabilities for years to come.
Switching to an electric car is one of the most significant ways you can make a positive change towards net zero. We want to make it cheaper and easier than any other option. Salary sacrifice makes this possible, allowing employees to save 20-50% on any electric car by reducing their salary in exchange for an electric car as a benefit. This makes electric cars an affordable option for everyone. You can calculate your savings by heading to The Electric Car Scheme’s quote tool - choose your lease terms and the car of your dreams and get a personalised quote!
Last updated: 28.02.25
