As part of the Autumn Budget, Chancellor Rachel Reeves announced changes to Vehicle Excise Duty (VED) for brand-new cars, effective from April 2025. These changes will impact the first-year tax rate based on a vehicle’s CO2 emissions, with significant increases in some categories.

The update aims to encourage the adoption of electric vehicles (EVs) and reduce reliance on higher-emission vehicles. Here’s what you need to know:

Plug-in hybrids and low-emission vehicles (1-50 g/km CO2): The first-year VED rate will increase to £110. Currently, vehicles in this category—including most plug-in hybrids—pay no VED in the first year, while petrol and diesel cars in the same band pay just £10.

Vehicles emitting 51-75 g/km CO2: The first-year VED will rise to £135, up from £30 for petrol/diesel vehicles and £20 for hybrids.

Higher-emission vehicles: Tax rates for vehicles emitting over 75 g/km CO2 will double

For example – A new Toyota Corolla 1.8 Hybrid (emitting around 102 g/km CO2): The first-year VED will increase from £170 to £340, resulting in an additional £170 in the first year.

A new Porsche Cayenne Turbo GT (emitting approximately 346 g/km CO2): The first-year VED will rise from £2,605 to £5,210, adding a significant £2,605 to the initial cost.

Standard VED rates beyond the first year: These rates will continue to rise annually, in line with the Retail Price Index (RPI).

This change reflects the government’s ongoing commitment to sustainability by incentivising cleaner vehicle choices. Customers planning to purchase a new vehicle should consider these updated tax rates when budgeting for 2025 and beyond.

It is worth noting that these changes only apply to brand-new cars registered from April 2025 onwards. They will not affect used cars or vehicles already registered before that date.

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