April Road Tax Changes 2025: Everything You Need to Know

The UK government is rolling out significant car tax changes in April 2025, affecting petrol and diesel cars, hybrid cars, and electric vehicles (EVs). These updates include increased vehicle excise duty (VED), adjustments to car tax rates, and new costs for low-emission cars. Additionally, pickup trucks and double-cab models may face reclassification, impacting their road tax bands.

Understanding these changes is crucial whether you own, lease, or plan to switch to a new electric car or hybrid car.

What’s Changing in Car Tax from 1 April 2025

From 1 April 2025, the UK government will implement several significant changes to car tax. One of the most notable updates is that electric vehicles (EVs) will no longer be exempt from Vehicle Excise Duty (VED). For the first time, EV owners will need to pay this tax. Additionally, the first-year road tax rates will double for most emissions bands, reflecting the government’s push towards more environmentally friendly vehicles. The standard rate of car tax will also see an increase, impacting all vehicle owners. Furthermore, the expensive car supplement, also known as the luxury car tax, will rise, affecting cars registered with a list price over £40,000. Vehicles registered before 31 March 2017 will experience small increases in their tax bands, ensuring that all vehicle owners contribute fairly to the tax system.

How Car Tax Works

Car tax, or Vehicle Excise Duty (VED), is a mandatory tax for vehicles used or kept on public roads in the UK. The amount of VED you pay is primarily based on your vehicle’s CO2 emissions, with higher-emitting vehicles incurring higher taxes. This tax can be paid annually or monthly, depending on your preference. The vehicle’s tax band, determined by its emissions, dictates the amount payable. Historically, electric vehicles were exempt from VED, but starting April 2025, they will also be subject to this tax. This change aims to create a more balanced and fair tax system across all vehicle types.

Vehicle Excise Duty (VED) and Road Tax Bands Updates

Starting in April 2025, the vehicle excise duty VED system will be revised. For the first time, EV owners will need to pay road tax, which is part of the Vehicle Excise Duty (VED). This affects all cars registered after the deadline, with tax rates influenced by CO2 emissions and emissions-based bands.

Key updates:

• Petrol and diesel cars will have increased first-year road tax based on emissions

• Hybrid cars will no longer receive a tax discount

• Electric cars will pay standard road tax rates for the first time

• The luxury car tax applies to new electric cars costing over £40,000

• Buyers of new cars will face increased first-year road tax rates and the expensive car supplement

Drivers will also see changes in first-year tax bills and ongoing VED rates, increasing overall tax burden for many motorists.

Petrol and Diesel Car Tax Increases

Petrol and diesel vehicles will face higher road tax bands, with the new vehicle tax set to align with inflation and environmental policies.

• First-year VED: Based on CO2 emissions, with higher polluters paying more

• Standard rate: Adjusted to reflect retail price index changes

• Luxury car tax: Affects cars registered over £40,000

With rising fuel type costs and taxation, many drivers may consider switching to low-emission cars or plug-in hybrids.

Hybrid Car Tax: No More Discounts

From April 2025, plug-in hybrids and low-emission cars registered will no longer have tax reductions.

• First-year road tax: Same as petrol and diesel cars

• Second to sixth-year tax rates: No longer discounted

• Benefit-in-Kind (BiK) tax: Increased for new hybrid cars

Fleet managers and company car users should factor in these new tax rules before making purchasing decisions.

Electric Vehicles: End of Free Road Tax

Electric vehicles (EVs) will lose their free road tax status, facing new tax rules from April 2025.

• First-year road tax: Same as the lowest petrol and diesel cars

• Annual VED: Set at £165 per year

• Luxury car tax: New EVs over £40,000 pay an extra £390 annually for five years

The goal is to make taxation fair across all fuel types, including zero-emission vehicles.

Expensive Car Supplement for EVs

The expensive car supplement (or luxury car tax) now applies to electric cars. EVs registered with a list price exceeding £40,000 will incur an additional £390 per year for five years.

How Does This Affect New Electric Vehicles?

• Popular new car models like the Tesla Model Y, BMW iX, and Mercedes EQC will be affected

• Buyers may choose cheaper EVs to avoid the extra tax burden

• Leasing vehicles may be a cost-effective way to bypass upfront taxation

Pickup Truck Tax Changes

The government is reconsidering how double-cab pickups are classified, potentially removing their light commercial vehicle (LCV) status. This means certain pickup trucks may face increased emissions-based bands.

• CO2 emissions-based taxation: Some pickups may be taxed similarly to passenger cars

• Company car tax (BiK): Costs will rise for registered keepers using pickups for work

• New tax rules could significantly impact commercial fleet operators

Businesses relying on pickups should assess these changes before April 2025.

Electric Vans and Car Tax

Electric vans, which were previously exempt from Vehicle Excise Duty (VED), will now be subject to road tax. Starting from April 2025, electric vans will incur a road tax of £355 annually. This change aligns with the government’s strategy to encourage the adoption of cleaner vehicles while ensuring that all vehicles contribute to the tax system. The first-year rate for electric vans will be set at £10, and the standard rate will be £195. This adjustment places electric vans on the same tax footing as electric cars, promoting fairness and consistency in vehicle taxation.

Impact on Many Motorists

For many motorists, these tax changes will increase the cost of vehicle ownership. Whether you own a petrol, diesel, hybrid, or electric vehicle, you can expect higher first-year road tax and increased VED rates.

• Registered keepers will face higher road tax bills

• Company car tax rates are increasing

• Public roads will see a shift towards lower-emission models

One way to avoid large first-year tax bills is through vehicle leasing, which provides fixed-cost solutions.

Car Tax Exemptions

Certain vehicles are exempt from car tax, including historic vehicles, classic cars, and those used by disabled individuals. While these vehicles do not need to pay Vehicle Excise Duty (VED), owners must still apply for a tax exemption. Additionally, vehicles not used on public roads, such as those kept in a garage or on private land, are exempt from VED. However, owners must notify the DVLA and obtain a Statutory Off Road Notification (SORN) to avoid penalties. These exemptions ensure that only vehicles actively using public roads contribute to the tax system.

What Happens if You Don’t Tax Your Car?

Failing to tax your car can result in penalties and fines. The DVLA will send a reminder to tax your vehicle, and if you fail to comply, you may receive a Late Licensing Penalty (LLP) letter. The initial fine is £80, but it can be reduced to £40 if paid within 33 days. If the fine remains unpaid, the case may be referred to a debt collection agency. Additionally, if you are caught using or keeping an untaxed vehicle without a SORN, you could receive an Out of Court Settlement (OCS) letter, potentially leading to a fine of up to £1,000. It’s crucial to stay on top of your vehicle tax obligations to avoid these costly penalties.

Frequently Asked Questions (FAQs)

1. How much road tax will I pay for an electric car from April 2025?

From April 2025, EVs registered from 2017 onwards will pay a first-year rate similar to low-emission petrol and diesel cars. The standard annual VED will be £165, plus an additional rate of £390 per year for EVs over £40,000.

2. Will hybrid cars still get tax reductions?

No, hybrid cars will now pay the same vehicle tax as petrol and diesel models.

3. What happens to the luxury car tax for electric cars?

The luxury car tax (or expensive car supplement) will now apply to new electric cars over £40,000, adding an extra £390 annually for five years.

4. Will pickup trucks be affected by the new tax rules?

Yes, some double-cab pickups may lose LCV status, leading to taxation based on CO2 emissions rather than fixed commercial rates.

5. How will the changes impact company car tax?

Company car tax is increasing for all vehicles, but electric vehicles still offer lower Benefit-in-Kind (BiK) tax than petrol and diesel cars.

6. What’s the best way to avoid high road tax costs?

Leasing a vehicle provides a fixed-cost solution that helps drivers manage rising VED rates and first-year tax bills.

Final Thoughts

The April 2025 road tax changes will affect petrol, diesel, hybrid, and electric vehicle owners, as well as pickup truck users. Whether you're considering an electric vehicle, hybrid, or commercial vehicle, understanding these new tax rules is essential to avoid unexpected costs.

For expert guidance on securing a tax-efficient vehicle, contact LetsLease Car Leasing today and find the best deal before the tax rules change.