Chancellor Rachel Reeves has confirmed a £280 charge for drivers of cars made after April 2017. The Labour Party Chancellor has officially announced Vehicle Excise Duty (VED) rates for the upcoming year, bringing changes that affect motorists across the UK.
Changes to Road Tax System
On 1 April 2017, the system for taxing new cars in the UK underwent a significant overhaul. The previous CO2-based VED system was replaced with three new road tax bands: zero, standard, and premium. These changes only applied to cars first registered after April 2017 and were introduced in direct response to falling CO2 emissions levels. Many motorists were paying little or no VED, costing the Treasury millions of pounds in lost revenue and prompting the government to revise how road tax is calculated.
First-Year Showroom Tax
Cars first registered after April 2017 remain liable for the first-year 'showroom tax', which is based on the vehicle's CO2 emissions. From the second year onwards, the standard rate applies, requiring drivers to pay £200 per year. New cars with a list price exceeding £40,000 (or £50,000 for electric cars) incur an additional £440 per year for the first five years the standard rate is applied.
New Tax Bands for 2025
The road tax system changed again in April 2025, with electric cars now subject to VED for the first time. New electric vehicles are charged the standard rate of VED and the expensive car supplement. They are also subject to the first-year showroom tax, which applies to vehicles with CO2 emissions between 1 and 50 g/km.
Under the updated tax bands for cars registered after April 2017, vehicles emitting 76 to 90 g/km of CO2 will be charged £280 at the first-year rate. This represents a significant increase for drivers in this emissions bracket.
Additional Charges
It is important to note that cars with a list price over £40,000 (or £50,000 for electric cars) when new must pay an additional £440 per year on top of the standard rate for five years. The five-year time limit begins from the second year the car is first registered.
These changes are part of the government's efforts to balance revenue collection with environmental goals, ensuring that all vehicle owners contribute fairly to road maintenance and infrastructure.
