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Guide

Here are all the car tax changes affecting drivers in 2025

Whether you’re a private car buyer, company car driver, or thinking about getting a pickup truck, here’s how tax rules will affect you in 2025.

Mark Nichol

Words by: Mark Nichol

Published on 30 January 2025 | 0 min read

Tax. It’s confusing or boring or depressing or all of those things at the best of times. And it’s especially bewildering when it comes to motor vehicles, not least because it's always changing. And there are LOADS of numbers and rules to keep up with. A convoluted and often expensive topic.
So here’s a (quite) quick and (relatively) simple guide to explain what you, a driver in the UK, can expect to pay in 2025 and beyond.

Electric cars are no longer tax exempt… even older ones

Yep, it was only a matter of time before the zero-rate EV bandwagon regeneratively charged to a halt. This guide explains in more detail, but basically any car registered from 1 April 2025 will pay a tenner in first year VED (“road tax”), then £195 for every year after that. Older EVs (registered between 2017 and 2024) will start to pay £195 per year from April, while EVs registered before 2017 will pay £20 per year.

Electric cars now have to pay the ‘luxury car tax’ too

According to the government, an “expensive” car is one with an RRP above £40,000 and it attracts the Expensive Car Supplement tax (ECS). That's an additional £410 per year on top of VED payments for the first five years after it's registered. Previously EVs were exempt, but will no longer be from April 2025. It’s worth saying that in April 2024, the ‘median’ list price of a new car was just under £42,000 according to Auto Trader data, which essentially means that the ‘average car’ is an ‘expensive car' in the eyes of the Government. But hey, it is still possible to buy a new EV for much less than that, as you can see here.

CO2-based tax means it’s still much cheaper to run an EV

This is still a fact, but it’s mainly limited to the first year, because ALL cars pay £195 in VED from the second year onwards, plus they all pay the ECS for five years from year two.

Here's a working example using Porsche Macans

Let’s say that in April 2025 you’re choosing between Porsche Macans, petrol or electric (lucky you). For a basic petrol Macan you’ll pay £4,680 in VED in the first year, whereas with the electric one you’ll pay £10. After that, they’ll both go to standard rate (£195 per year) plus the £410 ECS for five years. The petrol Macan is about £15k cheaper to buy, mind, but that’s another issue. Although that said, if you lease your electric Macan, all your VED is soaked into your monthly payments anyways, because that’s how leasing works.

Petrol, diesel and hybrid cars will all see VED hikes in 2025


Any car with CO2 emissions between 1-50g/km (most plug-in hybrids, basically) will jump from £10 in the first year to £110. Similarly, cars in the 51-75g/km band jump from £30 to £130. And anything that emits 75g/km or more will see the first-year rate double. So, if you want to buy an, ahem, ‘gas guzzler’ and benefit from today’s rates, make sure you register your new car before April 1 2025. Or you could always just buy a used car.

Company car tax (BIK) has gone up for all car types

The benefit-in-kind (BIK) rate for zero-emission vehicles will increase by one percent each year from 2025 to 2028. Currently 2 per cent, it will rise to 3 per cent in April 2025, then to 4 per cent in 2026 and 5 per cent in 2027. For vehicles producing 75g/km of CO2 or more, the BIK rate will increase by 1 per cent in April 2025 and stay that way until at least 2028. The rising percentage scale based on CO2 emissions remains, stopping at a maximum BIK of 37 per cent for high-emission vehicles (anything more than 170g/km).

Pick-up trucks are no longer a company car tax loophole

…sort of. Also, we’re not suggesting that you, an office worker and family car buyer who lives in a suburban semi-detached, wanted a company pickup truck as some sort of tax-reduction method. No way. And even if you did, there’s nothing wrong with that. Anyways, that double-cab pickup truck you’ve got your eye on will, from April, be considered a normal passenger car for tax purposes. This means a huge leap in benefit-in-kind payments if you run one as a company car.

Here's a working example using a Ford Ranger

Previously, the BIK for a 'commercial vehicle' like a pickup truck was fixed at £3,960 regardless of emissions or price. But from April, a high-priced double-cab pickup, a £50k Ford Ranger, for example, would fall into a 37 per cent BIK rate, meaning £3,550 in yearly tax for 20 per cent taxpayers, or just over £7k for people in the 40 per cent bracket.