Rachel Reeves has confirmed a £115 charge for drivers of certain cars registered after 2017. The announcement comes as the vehicle excise duty (VED) system undergoes further changes from April 2025.
Background of the VED Changes
On 1 April 2017, the UK government introduced a new road tax system for new cars, replacing the CO2-based VED with three bands: zero, standard, and premium. This change, implemented by the then Conservative government, aimed to address falling CO2 emissions that had led many motorists to pay little or no VED, costing the Treasury millions in lost revenue.
Current Tax Structure
Cars first registered after April 2017 are subject to a first-year 'showroom tax' based on CO2 emissions. From year two, the standard rate of £200 per year applies. Additionally, new cars with a list price over £40,000 (or £50,000 for electric cars) incur a £440 supplement for the first five years.
Changes from April 2025
The road tax system changed again in April 2025, with electric cars now liable for VED for the first time. New electric vehicles are subject to the standard rate and the expensive car supplement, as well as the first-year showroom tax (for vehicles with CO2 emissions between 1 and 50g/km).
Impact on Drivers
According to Confused.com, cars emitting between 1 and 50g/km of CO2 will pay £115 in year one, a £5 increase from the previous rate. Confused.com stated: "When you buy a brand-new car, you'll pay a first-year rate of VED based on your car's CO2 emissions. Higher emissions usually mean a higher tax bill. The first-year rate is designed to encourage buyers to choose low or zero-emission cars."
This £115 charge affects drivers of cars registered after 2017 that fall into the low-emission category, marking a significant shift in the UK's road tax policy.
