Rachel Reeves hits petrol, diesel and electric vehicles with new car tax hikes as drivers face £5,490 cost

Drivers across the UK are now facing higher car tax bills due to recent changes made to Vehicle Excise Duty, also known as VED. These changes started at the beginning of the new financial year on April 1, 2025, and they affect almost everyone whether you drive a petrol, diesel, hybrid, or electric car.

The new rules were announced last year by Chancellor Rachel Reeves during the Autumn Statement. One of the main goals is to encourage drivers to stop using petrol and diesel cars and instead buy electric or zero-emission vehicles. But even people who already switched to electric are now being asked to pay new taxes that didn’t exist before.

In the past, electric car owners didn’t have to pay VED, but that benefit has now been removed. All zero-emission cars, including electric ones, now have to pay standard road tax. On top of that, if the car’s original price was more than £40,000, owners will also have to pay an extra £425 each year because of something called the Expensive Car Supplement.

Even though these new charges might seem unfair to electric car owners, the government says it is trying to balance things out and make the system more equal. For example, newly registered electric cars after April 1, 2025, only have to pay £10 in the first year.

But if your car gives off between 1 and 50 grams of CO2 per kilometre, your first-year tax is now £110. For higher emissions, the tax rates go up sharply. Some petrol and diesel cars with the worst emissions can cost as much as £5,490 in the first year alone.

This is a big change, and a lot of drivers are now having to rethink what kind of vehicle they want to buy or whether they can afford to keep the one they already have.

Even older cars are affected. If your car was registered between March 1, 2001, and March 31, 2017, the amount you pay depends on how much CO2 your car produces. Cars that produce less CO2 are taxed less, while those with higher emissions are taxed much more. Some people who drive small cars that pollute very little still only pay £20 a year. But those with cars that emit more than 255g/km of CO2 now have to pay £760.

If your car was registered before March 1, 2001, the tax is based on engine size. Smaller engines pay £220, while larger engines cost £360 per year.

One group that’s still safe from these changes are classic car owners. If your car is more than 40 years old, you don’t have to pay VED at all.

All these changes mean that keeping a car on the road has become more expensive for millions of people. Many are now thinking about switching to cheaper, cleaner vehicles. Others are frustrated that even electric cars, which were once tax-free, are now being taxed.

These new rules are part of a bigger government plan to push people toward lower-emission vehicles, but they also mean higher costs for many drivers who are already struggling with rising living expenses.