7 Key UK Car Tax Changes 2025 (A Complete Guide to Car Tax)

Several car tax changes will hit the UK drivers in 2025, including the owners of EVs and ICE vehicles. Therefore, it’s important to understand the UK car tax changes 2025. From updated exemptions to the new Benefit-in-Kind (BiK) rules, this guide breaks everything down.

We’ll walk you through the 7 key UK car tax changes in April 2025 so you can make informed decisions and stay road-ready in 2025 and beyond.

Let’s get started!

Car Tax Bands Explained

Before we get started with the UK 2025 car tax changes, let’s understand the car tax bands. In the UK, Vehicle Excise Duty (VED) depends on several factors, including your car’s age, engine, and emissions.

To find out your rate, you’ll need to check your car’s tax band. If your car was registered after April 1, 2017, it falls into one of three bands: zero, standard, or premium.

Cars registered between March 2001 and March 2017 are split by CO₂ emissions. The lower the emissions, the less tax you pay. That said, you usually pay more in the first year. After that, a standard annual rate applies.

You’ll pay a rate based on a vehicle’s CO2 emissions the first time it’s registered. Similarly, you have to pay a higher rate for diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions.

Here is a table that outlines the tax you have to pay when you register your vehicle for the first time:

[Source: gov.uk]

7 Key UK Car Tax Changes April 2025

1. Changes to Electric Vehicles Tax

Big tax changes are made for electric car owners in 2025. Since April 1, 2025, new EVs are no longer exempt from the car tax. EVs registered on or after this date will pay £10 in the first year. From the second year onwards, the standard rate of £195 will apply.

If your EV was registered between April 1, 2017, and March 31, 2025, you’ll pay £195 annually. For older EVs registered between March 1, 2001, and March 31, 2017, the yearly rate is £20.

Also, if your EV costs over £40,000, expect more taxes. From the second to sixth year, you’ll pay a £425 supplement. That means a total of £620 each year for those high-end models.

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2. Car Tax Changes UK 2025 for Petrol, Diesel, and Hybrid Vehicles

From April 1, 2025, new petrol, diesel, and hybrid cars face higher first-year taxes. The first-year rate will now be double of what it was before. If your car emits 1–50 g/km of CO2, you’ll pay £110 instead of £10. For cars with 51–75 g/km, the rate jumps to £130 from £30.

Even higher-emission cars are affected. For example, 91–100 g/km CO2 now costs £350, up from £175. Cars with 255+ g/km CO2 face a huge jump – £5,490 instead of £2,745.

After the first year, all cars registered after April 1, 2017, will pay a standard £195 annually. This is a small increase from £190. Also, the £10 hybrid discount is gone. Now, hybrids pay the same rate as petrol or diesel cars.

3. Changes to Road Tax for Vehicles Registered Between March 1, 2001, and March 31, 2017

If your car was registered between March 1, 2001, and March 31, 2017, there are some updates. Cars in Band A (0–100 g/km CO2) will no longer be tax-free. They’ll pay £20 a year.

Other CO2 bands will also see small increases, ranging from £5 to £25. Cars with 101–110 g/km will pay £20. If your car emits between 226 and 255 g/km, you’ll now pay £735 yearly.

And if emissions are over 255 g/km, expect to pay £760. It’s a good idea to check your band so you know what to expect.

4. UK Older Car Tax Changes (Vehicles Registered Before March 1, 2001)

If your car was registered before March 1, 2001, the car tax works differently. Instead of emissions, the amount you pay is based on engine size. Cars with engines up to 1549cc pay a lower annual rate of £220. For cars with engines over 1549cc, the yearly cost is higher – £360 – which has recently increased from £345.

It’s a simple setup: smaller cars with smaller engines mean lower tax, while larger engines cost more to run. Always double-check your vehicle details before taxing, as the rules for older models differ slightly from those for newer ones.

5. UK 2025 Car Tax Changes for Commercial vehicles

Starting in April 2025, electric and hybrid vans will no longer be exempt from road tax. Instead, they’ll pay £355 annually, just like petrol and diesel light goods vehicles. This is a big change from the current £0 tax.

Additionally, double-cab pickup trucks are being reclassified. They’ll now be treated as passenger cars for tax purposes. As a result, owners will pay the standard VED of £195 per year. If the vehicle’s list price is over £40,000, the Expensive Car Supplement (ECS) of £425 per year also applies.

6. Changes in Benefit-in-Kind (BiK) Rates

Benefit-in-Kind (BiK) tax is what you pay if you drive a company car for personal use. It’s based on the car’s CO2 emissions and value.

In 2025, the BiK rate for electric vehicles (EVs) will rise from 2% to 3%. After that, it will increase by 1% each year until it reaches 5% in 2028. Benefit in Kind remains low for EVs, with an increase of 1% year by year, up until 2027 when it will reach 5%. It will then increase by 2% year on year to 9% in 2029.

For vehicles emitting over 75 g/km of CO2, the BiK rate also goes up by 1% in 2025. Cars with 170 g/km or more will hit the maximum rate of 37%.

EVs still offer big tax savings. For example, a BMW iX might cost around £560 a year in BiK. But a petrol BMW X5 could cost over £10,000 for higher-rate taxpayers. So, EVs remain the smarter choice for company drivers.

Moreover, the Benefit-in-Kind (BiK) tax for a £50,000 pickup could rise sharply, from around £3,550 to £7,000 per year. So, it’s important to check how these tax changes affect your business or personal vehicle.

7. Some Other UK Car Tax Changes

There are still a few exemptions. So you should understand when a car becomes tax exempt.

First, classic cars over 40 years old (so, pre-1985 in 2025) stay exempt from Vehicle Excise Duty (car tax). That means no tax bill for those vintage beauties.

Also, drivers over 70 may be exempt from new car tax changes in the UK from 2025. Similarly, vehicles used by disabled people, Motability cars, or ones that transport disabled passengers, are also exempt from paying car tax.

From December 2025, electric and hydrogen vehicles will no longer be exempt from the London Congestion Charge. They’ll need to pay the full £15 daily fee like other vehicles.

When it comes to paying your car tax, you’ve got options. You can pay yearly, every six months, or monthly. Just note, if you choose monthly payments, there’s a 5% extra charge.

Frequently Asked Questions (FAQs)

1. How do I find out the tax band for my car?

To find your car’s tax band, just head over to the Gov.uk vehicle tax checker. You’ll need your car’s registration number. The system will show you details like CO2 emissions, engine size, and fuel type.

These factors help determine which band your car falls into and how much you’ll pay. Newer cars use a simpler band system than older ones.

2. Will electric vehicles (EVs) still be exempt from car tax in 2025?

No, the exemption is ending in 2025. Starting April 1, 2025, all new EVs will pay car tax. The first year will be £10, and then £195 every year after. Older EVs will also start paying tax, either £195 or £20, depending on when they were registered.

The government wants EV drivers to contribute like everyone else. So if you’re planning to buy one, it’s good to factor that in. The car tax change applies across the UK.

3. Will electric cars pay the London Congestion Charge?

Yes, starting December 2025, electric vehicles will have to pay the London Congestion Charge. This charge is £15 per day if you drive in central London during peak hours.

Until then, EVs are exempt. The change is part of a plan to reduce traffic and encourage public transport. So even though EVs help with emissions, they won’t avoid this fee for long.

4. What happens to your road tax when you sell your car?

When you sell your car, your road tax doesn’t transfer to the new owner. Instead, it’s automatically cancelled once you tell the DVLA. You’ll get a refund for any full months left on the tax. The new owner must tax the car themselves before driving it.

Final Thoughts: UK Car Tax Changes 2025

Understanding the UK car tax changes for 2025 is essential for all drivers, especially those considering electric or hybrid vehicles.

Whether you’re buying, selling, or simply keeping your current car, avoid unexpected costs and plan better by understanding the tax changes.

We’ll help you do that by updating you on Vehicle Excise Duty, Benefit-in-Kind rates, and exemptions.

That said, if you’re thinking the taxes are becoming too much and are considering a change, now’s the perfect time. With Exchange My Car, you can compare offers and sell your car hassle-free. Free collection and fast payment is included.

If you’re looking to learn more about cars and taxes, please visit our blogs section here.