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UK drivers were advised of Rachel Reeves car tax change to their Vehicle Excise Duty (VED), or road tax on April 1, 2025. Previously free from this tax, electric cars (EVs) will now be obliged to pay VED under the new policy implemented by Chancellor Rachel Reeves.
For example, electric vehicles will have a £10 tax in the first year and then a regular fee of £195 each year after that. Plus, cars that emit more than 255g/km of CO₂ will see a big jump in their vehicle tax, going up to £5,490. These changes are designed to promote low-emission and electric cars, but they also mean more expenses for a lot of drivers.
What’s With the New VED Rates
Before their implementation electric cars did not pay Vehicle Excise Duty yet starting this year they will need to pay first-year fees of £10 and annual fees of £195 afterward. EVs priced at more than £40,000 will also have to pay an extra £425 “expensive car supplement” each year for their first five years of ownership. The updated Rachel Reeves car tax change target both customer adoption of environmentally friendly vehicles and the management of environmental challenges.
The Cost of Going Green
New electric vehicles will have a £10 tax in the first year and a regular £195 fee starting from the second year. Plus, if the EV costs more than £40,000, there’s an additional £425 annual charge for the first five years. This means a lot of new EVs, which usually go over that price, will see a big jump in yearly tax expenses.
These rules apply to both new and used EVs based on their initial price. While the goal is to encourage low-emission cars, these changes might make EVs less affordable and appealing for some buyers.
Double-Cab Pick-Up Trucks
Double-cab pick-up trucks such the Ford Ranger, Toyota Hilux, and Isuzu D-Max are having a tax makeover and will now be categorised as corporate vehicles rather than vans. This implies owners will have to deal with Benefit-in- Kind (BIK) Rachel Reeves car tax change dependent on the carbon emissions of the vehicle instead of paying a flat annual tax of £3,960.
A high-emission diesel truck may, for example, cause a 40% taxpayer’s annual tax payment to skyrocket above £7,000. Furthermore less beneficial are capital allowances and fuel benefit charges, which will increase total costs.
Petrol and Diesel Vehicles – Facing Steep Increases
If your car spews more than 255g/km of CO₂, prepare for a first-year Rachel Reeves car tax change increase to £5, 490, a notable departure from past rates. Popular vehicles such as the Volkswagen Polo and the Audi A3 plug-in hybrid will have their first-year VED prices either double or more. The government is pushing this shift in order to encourage more individuals to convert to low-emission and electric vehicles.
Tips to Manage Increased Costs
Startled by the revised VED rates? There are strategies to control your spending, hence there is no need to worry. Considering low-emission vehicles or hybrids, which typically have reduced Rachel Reeves car tax change rates, is one excellent choice. Another wise decision may be switching to electric vehicles, particularly given their usually reduced running expenses despite the additional levies. And if you move fast, you might still be able to grab certain municipal incentives meant to support environmentally friendly transportation or government subsidies. It’s all about being proactive and selecting a car that fits your budget and helps the environment.
Exemptions and Reliefs
And if you receive particular disability payments on Rachel Reeves car tax change you may be entitled to a complete or partial vacation from Vehicle Excise Duty (VED). In order to be fully exempt, one must be on the higher or enhanced rate mobility component of Disability Living Allowance (DLA), Personal Independence Payment (PIP) or War Pensioners’ Mobility Supplement. One car only – exempted for your use for your personal requirements, you should register your car in your name or that of your chosen designated driver.
If you’re on the standard rate mobility component of PIP, you can score a 50% discount on VED. Just head to a Post Office that handles Rachel Reeves car tax change and bring your Certificate of Entitlement along with your vehicle papers. Keep in mind, these reductions aren’t given automatically—you have to apply for them.
