New UK laws to be introduced in April including changes to car tax and it could cost you £100s extra
DRIVERS will have to pay more tax from next month after a new law comes into effect.
Changes to Vehicle Excise Duty (VED), also known as road or car tax, will be put into force from April 1.
It means those with electric, zero or low emission cars, vans and motorbikes will have to pay the tax for the first time.
The law change applies to drivers of both new and existing vehicles.
Meanwhile, band A under the current VED system is being removed for these same drivers.
This band is for owners of vehicles that emit CO2 emissions below 100g/km.
How will the changes affect you?
If you have an electric, zero or low emission car registered on or after April 1, 2025, from April 1 you will have to pay £10 car tax in the first year.
From the second year onwards, you will have to pay the standard rate of £195.
If you have an electric, zero or low emission car registered between April 1, 2017 and March 31, 2025, you will have to pay £195 from April 1.
For those with an electric, zero or low emission car registered between March 1, 2001 and March 31, 2017, you will have to pay £20 car tax.
Owners of hybrid vehicles who previously got a £10 a year discount on their car tax will lose it and have to pay £195.
Electric vans and motorcycles will also move to the existing annual rates for light goods vehicles and small engine size vehicles.
Electric vans registered on or after March 1, 2001, and under 3,500kg will have to pay up to £351.75.
Electric vans registered between March 1, 2003, and December 31, 2006, and under 3,500kg will have to cough up up to £147.
Electric motorbikes will have to pay up to £122.85 depending on the model and payment method.
Drivers of electric vans and motorbikes can pay for road tax in different instalments which affects the amount paid.
What is car tax and how do you pay it?
Car tax is paid by drivers every year to the government and used to fund projects such as road works and maintenance.
How much you pay for car tax varies depending on when your car was registered,.
For example, cars more than 40 years old are exempt from paying car tax while if it was registered before March 1, 2001, it is taxed on the engine size.
One of the easiest ways to pay for your car tax is on the Government’s website via www.gov.uk/vehicle-tax.
You can also use a Government tool to figure out if your car is currenly taxed: www.gov.uk/check-vehicle-tax.
The full list of rates is available via www.gov.uk/vehicle-tax-rate-tables/other-vehicle-tax-rates.
From April 1, electric vehicles that cost more than £40,000 will also have to pay the £425 “Expensive Car Supplement”, also known as the luxury car tax.
Benefit-in-Kind (BiK) tax rise
From April 6, Benefit-in-Kind (BiK) tax will rise for electric vehicles from 2% to 3% and continue to rise to 9% by 2029/30.
You pay BiK tax on benefits or perks provided to you by an employer, like a company car.
So, if you lease an electric vehicle through a salary sacrifice scheme, you will have to pay more tax on your car from next month.
Despite the BiK tax hikes to EVs starting from next month, you’ll still pay less than if you were to lease a petrol or diesel vehicle.
These types of vehicles have BiK tax rates of up to 37%.
Freeze on fuel duty
Not a new law, but a freeze on fuel duty first implemented in the 2022/23 tax year has been extended.
Fuel duty is a tax added to the price of petrol, diesel and other fuels paid to the government and used to cover the cost of maintaining roads.
The five pence per litre cut will was due to end this month, but will now end on March 22, 2026.
It means the tax is fixed at 52.95p per litre of gas and diesel, which includes the five pence cut.
The measure has been put in place to keep the price of fuel down for drivers.
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