Upcoming Car Tax Changes in 2025: What UK Drivers Need to Know

Understanding the forthcoming vehicle tax changes is crucial for all UK drivers. Here's a simplified breakdown of what's set to change in 2025:

Electric Vehicles (EVs):

New Tax Obligations: Starting from April 1, 2025, electric cars will no longer be exempt from Vehicle Excise Duty (VED). Newly registered EVs will incur a £10 VED charge in the first year, followed by an annual £195 fee. EVs registered between 2017 and 2024 will also begin paying £195 annually from April 2025. Those registered before 2017 will face a £20 yearly charge.
Luxury Car Tax: Previously, EVs were exempt from the Expensive Car Supplement (ECS), an additional £410 annual charge for cars with a list price over £40,000, applicable for five years after registration. From April 2025, this exemption will end, and EVs exceeding the £40,000 threshold will be subject to the ECS. Notably, as of April 2024, the average new car price was just under £42,000, meaning many vehicles will fall into this category.

Petrol, Diesel, and Hybrid Vehicles:

Increased VED Rates: Vehicles emitting 1-50g/km CO₂ (typically plug-in hybrids) will see first-year VED rise from £10 to £110. Those emitting 51-75g/km CO₂ will have their first-year rate increase from £30 to £130. Vehicles emitting over 75g/km CO₂ will experience a doubling of their first-year VED rates. To avoid these hikes, consider registering new vehicles before April 1, 2025.

Company Car Tax (Benefit-in-Kind or BIK):

Gradual Increases: The BIK rate for zero-emission vehicles will rise by one percentage point annually, moving from the current 2% to 3% in April 2025, 4% in 2026, and 5% in 2027. For vehicles emitting 75g/km CO₂ or more, the BIK rate will increase by 1% in April 2025 and remain at that level until at least 2028. The CO₂-based scaling system persists, capping at a maximum BIK rate of 37% for high-emission vehicles (those emitting over 170g/km CO₂).

Pick-Up Trucks:

Tax Loophole Closure: Historically, some pick-up trucks were classified as Light Commercial Vehicles (LCVs), attracting lower BIK rates. From April 2025, stricter criteria will be enforced to qualify as an LCV, potentially increasing tax liabilities for certain pick-up models.

Key Takeaways:

EV Owners: Anticipate new VED charges and potential ECS fees if your vehicle's list price exceeds £40,000.
Buyers of Petrol, Diesel, or Hybrid Cars: Be prepared for higher first-year VED rates based on CO₂ emissions.
Company Car Users: Expect incremental BIK rate increases over the coming years.
Pick-Up Truck Drivers: Review your vehicle's classification to understand potential tax implications.

Staying informed about these changes will help you make cost-effective decisions regarding vehicle purchases and ownership.

Why Buy Now?

With tax increases on the horizon, now is the best time to switch to a new or used vehicle before prices rise. At Johnsons Cars, we have a fantastic range of EVs, hybrids, and fuel-efficient petrol and diesel models to help you get ahead of these changes.

Beat the tax hikes—visit Johnsons Cars today and drive away in your next vehicle before the new rules take effect!

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Head office

Reg Office: Johnsons Cars Limited Empire Court Redditch United Kingdom B97 4DA

Reg. Company Number: 3716766

VAT Reg. No. GB 927 5516 06

www.johnsonscars.co.uk

Financial Disclosure

Johnsons Cars Limited is an appointed representative of ITC Compliance Limited which is authorised and regulated by the Financial Conduct Authority (their registration number is 313486) and which is permitted to advise on and arrange general insurance contracts. Johnsons Cars LTD is authorised and regulated by the Financial Conduct Authority for consumer credit activity and our registration number is 688450. Registered Name: Johnsons Cars Ltd. Registered Office: Empire Court, Albert Street Redditch Worcestershire B97 4DA. Registration No. 3716766 VAT Registration No. GB927551606

As an FCA regulated credit broker we can introduce you to a selected group of lenders / brokers (see below) who may be able to help you finance your purchase. This group of lenders / brokers provides us with a range of products which may be suitable for your purchase. We will explain the key features of those products to you.

Volkswagen Financial Services (UK) Limited, Evolution Funding Limited, Santander Consumer (UK) plc, Honda Finance Europe PLC, CA Auto Finance UK Ltd, Suzuki Financial Services Limited, Volkswagen Financial Services (UK) Limited, Hyundai Capital UK Limited, Stellantis Financial Services Uk Limited, Mazda Financial Services (UK) PLC, FCE Bank Plc, We are a credit broker and not a lender. We can introduce you to a limited number of lenders and their finance products, we act as their agent for this introduction. We are not an independent financial advisor; we will provide details of products available. We may advise you on the products, subject to your personal circumstances, though you are not obliged to take our advice or recommendation.

We do not charge you a fee for our services. we will typically receive commission from whichever lender we introduce you to (either a fixed fee or a fixed percentage of the amount you borrow).

Unless we consider it to be inappropriate given your personal circumstances, for certain vehicles e.g. New, our approach is to introduce you to the lender who are usually able to offer the best available package for you, taking into account interest rates, residual valuations (where applicable) and other contributions. If they are unable to make you an offer of finance, or the vehicle is not one that we would normally place with them we will introduce you to other lenders on our panel. The lender we introduce you to and available rates will depend upon a number of factors including: the vehicle, your personal circumstances and the likelihood of a lender to accept an application based on information provided.

Lenders typically pay a commission to us for introducing you to them, calculated by reference to the vehicle model or amount you borrow. Different lenders may pay different commissions for such introductions; some lenders may also provide preferential rates to us for the funding of our vehicle stock and also provide financial support for our training and marketing. But any such amounts they and other lenders pay us will not affect the amounts you pay under your finance agreement, all of which are set by the lender concerned. If you would like to know the amount of any remuneration we have received from the finance provider, please ask us.

All finance applications are subject to status, terms and conditions apply, UK residents only, 18’s or over, Guarantees may be required. View our full finance disclosure.

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