Owners of older vehicles are being warned of new car tax changes being introduced next year which could have a dramatic impact on their finances.
At the end of October, Chancellor Rachel Reeves unveiled Labour’s first Autumn Statement which included a number of massive changes for British motorists.
This included a surprise freeze on the five pence per litre fuel duty cut, additional funding for potholes and road repairs, as well as new Vehicle Excise Duty (VED) rates.
It stated that the Government would uprate standard VED rates for cars, vans and motorcycles, excluding first year rates for cars, in line with the RPI (Retail Price Index) from April 1, 2025.
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Some drivers will end up paying more than this year from April 2025
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This will result in the vast majority of petrol, diesel and electric car owners paying more to keep their vehicles on the road.
From April 1, 2025, electric vehicles will also be required to pay VED, as announced by former Chancellor Jeremy Hunt, who aimed to create a “fairer system of taxation”.
All vehicles registered on or after April 1, 2017, are required to pay tax based on the emissions output of their vehicles, ranging from 0g of CO2 per kilometre to vehicles over 255g/km.
Cars registered between March 1, 2001, and March 31, 2017, are also based on CO2 emissions, although the bands are more restrictive, and not as expensive.
The most polluting vehicle registered after April 1, 2017, will end up paying £2,745, while the most polluting car before that would be in Band M and pay £735.
However, cars registered before March 1, 2001, will also be subject to pay higher levels of car tax, since the tax is based on the size of the engine.
A vehicle with an engine smaller than 1549cc will pay £210 for a single 12-month payment, compared to £345 for any vehicle with an engine larger than 1549cc.
Experts are now warning that owners of older vehicles could face price hikes based on the rate of inflation, as announced by the Chancellor in the Budget.
This could see motorists face a cost of £220 for a vehicle with a smaller engine, while owners of larger engines could face a £360 charge.
However, these rates could still rise in the coming months, especially if it is based on the rate of inflation, which could continue to fluctuate.
The Budget also saw changes introduced for VED first year rates for new cars registered after April 1, 2025, in a bid to “widen the differentials between zero emission, hybrid and internal combustion engine cars”.
Zero emission cars will pay the lowest rate at £10 until 2029-2030, while rates will rise to £110 for cars emitting 1-50g/km of CO2 and £130 for vehicles with 51-75g/km.
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Chancellor Rachel Reeves unveiled the car tax changes at the end of October
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Any vehicle which emits 76g/km of CO2 and above will double from its current rate, meaning that owners of the most polluting vehicles (over 255g/km) will be facing charges of £5,490.
These car tax hikes are being done to make zero emission vehicles more attractive with low Vehicle Excise Duty rates compared to petrol and diesel cars.
