Major car tax change coming in WEEKS could see drivers hit with price hikes – but there are five exemptions
BRITISH drivers could be facing price hikes amid a major road tax change coming within weeks.
Motorists could end up paying hundreds more every year as inflation bites amid a cost of living crisis.
The DVLA has confirmed that the rates of Vehicle Excise Duty (VED), commonly called road tax, will rise from April 1.
This will see payments for most drivers increase by the RPI rate of inflation – likely around 6%.
Tax expert Andy Wood, of Tax Natives, has provided a breakdown of what the extra costs might look like.
He said: “The impending rise in VED rates will substantially impact drivers of petrol, diesel, and hybrid vehicles across the UK.
“Individuals relying on traditional fuel types may need to allocate additional funds to their vehicle taxes, potentially amounting to hundreds of pounds.
“Vehicle taxation costs vary based on age and environmental impact.”
The UK operates three systems of VED, depending on when your vehicle was registered.
The newest, introduced in 2017, is itself split into two rates – one for your first year on the road based on emissions and then a second for after the first year based on the cost of the car.
Andy explained that cars registered after April of that year will face a £10 increase in their first-year payments at the lowest emissions range.
More polluting models could see the first-year rate rise up to £2,745 – an increase of £140 on last year.
The second rate is set to remain the same, with a flat rate of £190 (or £180 for “alternative fuel vehicles”).
However, the additional Expensive Car Supplement, paid for five years on cars worth over £40,000, is rising from £390 to £410.
Motors registered between 2001 and 2017 are taxed based purely on emissions.
From April, the most polluting cars will see their rate rise from £695 to £735, while lower bands could see a spike of between £20 and £35.
Then, for cars registered before 2001, the tax is based on engine size.
Cars under 1549cc will now be charged a flat rate of £200, while larger engines will incur a £325 payment.
Fortunately, there are five key exemptions which could see thousands of Brits pay no tax at all.
Five major VED exemptions
- Low and no-emission vehicles – those emitting less than 100g/km of carbon dioxide registered before 2017
- Historic vehicles – those which are more than 40 years old on a rolling basis
- Vehicles used by disabled people – if you qualify for the higher rate of major disability benefits including Disability Living Allowance, Personal Independence Payment or Child Disability Payment
- Vehicles used for agriculture, horticulture and forestry – including tractors
- Vehicles registered SORN
However, on the subject of loopholes, a very important one is set to run out soon.
From April 1 2025, EVs from after 2017 will be required to pay VED at the same rate as the lowest band petrol or diesel models in the first year and then the standard rate from there on.
They will also be subject to the £410 Expensive Car Supplement if registered after that date and worth over £40,000.
Andy added: “This structured approach to taxation aims to foster sustainability and fairness within the automotive industry by ensuring that all vehicle owners contribute proportionately to the environmental impact of their vehicles.
“The tax system encourages responsible vehicle ownership by imposing additional charges on higher-value vehicles and aligns with broader environmental objectives.”