Changes to Tax: How Much Will Car Tax Be in 2025?

Big changes are hitting the road in 2025, and they’re set to make a dent in our wallets. Starting in 2025, significant updates to UK car tax are rolling out, impacting petrol, diesel, and electric car owners alike. These changes aim to level the playing field as the government shifts focus towards generating revenue from all types of vehicles, including electric ones. For those of us cruising the UK’s motorways or pottering through local towns, the cost of keeping a car on the road is about to see a noticeable adjustment.

What’s Changing in 2025?

The headline news is that electric cars are losing their free ride when it comes to road tax. From April 2025, if you’re driving an EV, you’ll start paying Vehicle Excise Duty (VED) just like everyone else, at £165 a year for starters. And if your shiny new electric car costs over £40,000, there’s an extra £355 a year slapped on top for five years.

It’s a shift that levels the playing field between electric and petrol or diesel cars, as the government looks to recoup revenue as more of us switch to greener wheels. So when you’re cruising along the M1 or twisting around your local B road in your electric vehicle, be prepared for these tax tweaks coming your way.

When Does the Change Come to Fruition?

From April 2025, new car tax rules will kick in across the UK. This means drivers of all types of cars – whether petrol, diesel or electric – will need to consider how these changes impact their wallets. For many, it marks the end of an era where electric cars have been tax-free.

Tax Per Category

Let’s break it down into what this means for your car:

• Petrol and Diesel Cars: The existing Vehicle Excise Duty (VED) rates will continue, but drivers can expect incremental increases year-on-year. For new petrol and diesel cars, first-year rates remain based on CO2 emissions, after which standard rates apply.
• Electric Cars: This is where the biggest shift occurs. As of 2025, electric cars will no longer be exempt from road tax. Instead, they will be subject to a standard rate of £165 per year, in line with many petrol and diesel cars. New EVs registered from 2025 onwards will also incur a first-year VED rate based on emissions, though the specific structure for this is still under discussion.
• Older Vehicles: Cars registered between 2001 and 2017 will continue to be taxed based on their CO2 emissions, with rates ranging from £20 to £600 per year depending on the vehicle’s environmental impact.

For many drivers, these changes signal the need to weigh up the long-term benefits of petrol, diesel or electric vehicles. With new car tax rates in 2025, the traditional financial advantages of going electric are shrinking.

Personal Car Leasing

Personal car leasing remains a smart option for staying ahead of car tax changes in 2025. Leasing a new electric or low-emission vehicle can help you navigate the updated tax structure without committing to the long-term costs of ownership.

Business Car Leasing

For businesses managing fleets, these tax changes are particularly relevant. Switching to newer, low-emission vehicles could help minimise annual VED costs while keeping your business on the right side of the taxman. Browse our business car leasing deals for the UK’s most competitive deals out there.

Van Leasing

The updates to car tax rates in 2025 apply to vans, too. If you rely on a van for work, leasing a newer model could save on emissions-based charges, ensuring you’re meeting tax regulations while still getting the job done. Take a look at our van lease deals page for dedicated offers for vans and pickup trucks.

How Much Will Electric Car Tax Be In 2025?

While electric cars still offer savings on fuel costs and contribute to a cleaner environment, this new tax rate means drivers will need to factor road tax into their budgeting from 2025 onwards. Electric cars will cost £165 annually in VED, marking the end of their tax-free status. For premium electric vehicles worth over £40,000, there’s an additional surcharge of £355 per year for five years.

If you’re ready to lease today, cars2buy is the UK’s number one destination for top-of-the-line lease deals from trusted dealerships. With our transparent service, we collect the very best electric car lease offers from across the web so that you can compare, search, filter and find the deal that suits you. We streamline the process of acquiring a brand-new car on a lease, sparing you the exhaustive effort of sifting through countless offers across many websites. Browse our personal car lease deals today, and you could be driving away in a brand-new electric car sooner than you think.