How is car tax changing? HMRC rates updated - is yours going up?

Major changes to car tax, or vehicle excise duty (VED) will be introduced tomorrow, April 1 2025, which could see costs go up for many drivers. VED, often referred to as car tax, is a tax on the ownership of a vehicle. Rates vary depending on the age of a vehicle and its CO2 emissions, and are updated each year.

Zero and low-emission vehicles such as electric cars have been exempted by HMRC, but this ends tomorrow, alongside others are going up. The policy was announced by then-chancellor Jeremy Hunt under the Conservative government in November 2022. At the time, he said he wanted to “make our motoring tax system fairer”.



What impact will this change to car tax have on drivers? The biggest increase will be for people who purchase a petrol, diesel or other Internal Combustion Engine (ICE) cars with emissions above 76 g/km CO2. Another new change is that people who purchase electric, zero or low-emission vehicles, will now have to pay this first year tax for the first time. In addition, the £10 discount that hybrid vehicles used to receive has now been removed.

You can view the VED rates for new cars purchased from 1 April 2025 online, at www.gov.uk/vehicle-tax-rate-tables Martin Lewis trick to save drivers money on car tax - but be quick Martin Lewis highlighted a trick on his Money Show Live, making us of a loophole in the car tax system which could save drivers of electric vehicles.

“Do you have an electric vehicle? If so there’s a trick to get a year tax-free," he said. “From the 1st of April, EV owners will start paying Vehicle Excise Duty - road tax as it used to be commonly known, it isn’t it’s Vehicle Excise Duty - which will be £100+. “But if you re-tax now on gov.

uk it’s free. So you get a year from the date that you re-tax. So, you might want to leave it 'til the last day of March and then it would be perfect but if you just want to do it, do it now and you get a year longer.

“Now the crucial thing of this is, you can re-tax at any time, even if you only did it two months ago. You can do it again now. You have to pay each time, but it’s currently free so there’s nothing to pay.

" Do you have an Electric Vehicle? Urgent trick to save you cash. Please share with anyone it's relevant for. A snippet from my ‘Beat April Deadlines’ show, watch the full thing on: https://t.

co/E4G3bE8FwG pic.twitter.com/W2DIb4KDTm — Martin Lewis (@MartinSLewis) March 20, 2025 How about the expensive car supplement? Also known as the luxury car tax, this affects vehicles with a list price in excess of £40,000.

This involves paying an annual supplement on top of the standard rate for years two to six after a vehicle is first registered. From Tuesday the amount will be £425. New EVs registered from Tuesday will be liable for the expensive car supplement.

There are fears this will put some people off from going electric. Josh Halt, account manager at Motorfinity , says: " If you were browsing a car before April 1 and you decide to buy it after that date, we’d encourage you to reassess your affordability to ensure it’s still within your budget. If you’re not sure, always work with your car dealer or broker to find a different car or finance offer that suits your current financial situation.

" Recommended reading: DWP benefits rise - how much and when do they go up? Child Benefit increase April 2025 exact new figures Nationwide, Lloyds, Halifax, Santander HSBC customer warning With the cost of tax going up, where else can customers look to make savings? "People can become very focused on wanting a certain brand or type of car, but you should approach the car buying process with an open mind," says Josh. "There are so many new models of cars, as well as exciting new brands on the market that offer very competitive prices. Be sure to browse the range of established brands, as well as those you wouldn’t normally consider, to find the best deal.

You might be pleasantly surprised. "Also, it’s worth shopping to find any discounts you could be eligible for due to the industry you work in, or where you work. "For example, our eligible customers – which includes NHS workers, police, fire and ambulance services as well as those in the residential social care and the armed forces - save on average £7,000 when buying through us, so even with these price increases, these discounts can help you get more for your money when buying your next new car.

"Speak to your HR team or browse online to see if you’re eligible for any discounts like this.".