Exact date HUGE car tax rule change will see drivers pay £2,800 MORE each year – how to save on costs
A HUGE car tax change is set to see drivers paying as much as £2,800 more each year just to stay on the road.
The average driver will likely see their bill double, while some will have to stump up for the very first time.
Every year, the amount of road tax (VED) you pay rises in line with inflation.
Given the spikes in inflation over the past couple of years, this would already have led to a fairly hefty increase in bills for most drivers.
But in last week’s Budget, Chancellor Rachel Reeves made some adjustments to the VED tax bands which have piled on even more costs.
Ms Reeves said she was making the changes to “strengthen incentives to purchase zero-emission and electric cars” by making it more expensive to drive petrol or diesel models.
Under the bands, cars are categorised based on their C02 emissions, measured in grams per kilometre.
With the new rates, the most polluting vehicles producing over 255g/km will see a whopping £2,745 increase from £2,745 to £5,490 – a hike of 100%.
This includes many HGVS, as well as several normal passenger cars like the V8 Range Rover and Aston Martin Vantage.
Even a car with the average emissions rate, 138g/km, will see costs double from £270 to £540.
And plenty of everyday motors are well over that – the popular Volvo XC90 for example will see rates rise from £1,095 to £2,190.
But it’s not all going the way of EV owners.
The new tax bands will also include electric and zero-emission vehicles for the first time.
Such models have previously been exempt from VED in order to encourage uptake.
But the Treasury is understood to be concerned that increasing EV adoption could rip the bottom out of both VED and fuel duty receipts.
As such, a new band will be created for these vehicles at the current lowest rate of £10.
EVs worth over £40,000 will also be subject to the Expensive Car Supplement, adding an extra £410 a year to their bills between the second and fifth year of registration.
The majority of hybrid models, which previously fell under this band, will see some of the largest increases.
Cars emitting between 1 and 50g/km will see rates rise eleven-fold from £10 to £100.
And the next band up (51-75g/km) will go from £30 to £130.
These changes will be enacted on April 1 2025.
However, the Government has ruled out an even bigger and more controversial change to the tax system.
There had been reports in the run-up to the Budget that ministers could replace emissions-based VED with a pay-per-mile system, where drivers pay based on road usage.
It was suggested that this new method could impose a rate of up to 15p per mile, taking the average driver’s tax bill to over £1,000.
But the rumours were dispelled when a Department for Transport spokesperson told SunMotors that there were “no plans” to bring in pay-per-mile under the current government.
Three exemptions to avoid April 1 VED hike
By Jacob Jaffa, Motors Reporter
- A total exemption on ‘historic vehicles’, registered over 40 years ago on a rolling basis – the current cut-off is 1984.
- Discounts for certain hybrid and EV models depending on their year of registration – check your vehicle’s status on the DVLA website
- Discounts for disabled drivers in receipt of certain benefits:
- Higher rate mobility component of Disability Living Allowance (100%)
- Enhanced rate mobility component of Personal Independence Payment (100%)
- Enhanced rate mobility component of Adult Disability Payment (100%)
- Higher rate mobility component of Child Disability Payment (100%)
- War Pensioners’ Mobility Supplement (100%)
- Armed Forces Independence Payment (100%)
- Standard rate mobility component of Personal Independence Payment (50%)
- Standard rate mobility component of Adult Disability Payment (50%)