From 1st April 2025, the UK government is set to introduce changes to Vehicle Excise Duty (VED) for new cars, with a focus on both electric and internal combustion engine (ICE) vehicles.
First-Year VED Rates:
Electric Vehicles (EVs):
New EVs will incur a first-year VED of £10, a slight increase from the previous £0.
From the second year onwards, EVs will be subject to the standard annual rate of £195.
Internal Combustion Engine (ICE) and Hybrid Vehicles:
First-year VED rates for these vehicles will see substantial increases.
New vs Old Rates:
The Expensive Car Supplement, effective from April 1st, 2025, is an additional tax that applies to vehicles with a list price exceeding £40,000 at the time of first registration. This measure is designed to apply to all vehicle types, including electric vehicles (EVs), which were previously exempt from such charges.
Key Points of the Expensive Car Supplement:
- Applies to: Vehicles with a list price over £40,000 at first registration.
- Charge: £425 per year.
- Duration: This additional charge will be paid annually for five years, starting from the second year after registration.
- On top of standard VED: The £425 supplement is added on top of the standard annual VED of £195, bringing the total VED for these vehicles to £620 per year from the second year of registration onwards.
Impact on Electric Vehicles (EVs):
While EVs will now contribute to VED (with a first-year rate of £10 and the standard annual rate of £195), EVs with a list price over £40,000 will also be subject to the £425 Expensive Car Supplement starting from the second year. This means the total VED for these premium EVs will amount to £620 per year from the second year onwards.
This change is part of the UK government's broader approach to adjusting VED rates to better reflect vehicle emissions, environmental concerns, and car prices. Even though the goal is to encourage more electric vehicle adoption, owners of more expensive EVs will now face a higher tax burden compared to lower-cost EVs.