From 1st April 2025, first year road tax is set to rise, doubling in cost for some car emission grouping bands and being introduced to those emission groups previously exempt.
If you’ve purchased a new car in recent years, you might be aware that drivers are required to pay a higher rate of road tax in the first year—this cost is typically included in the vehicle’s purchase price.
For those unfamiliar with this policy, all brand-new cars are subject to an increased first-year tax rate, known as vehicle excise duty (VED). The amount payable depends on the car’s CO2 emissions, and this rate is periodically adjusted for inflation.
In the Autumn 2024 Budget, it was announced there would be a substantial increases to first-year road tax for new car buyers. In addition to raising these charges, it was confirmed that electric vehicle (EV) owners will be required to pay road tax for the first time.
Alongside these changes, there will be an increase in the ‘expensive car supplement’ (also known as the luxury vehicle tax) for cars that had a purchase price of £40,000 or more. Previously, low-emission vehicles were exempt from this charge, but starting April 1, 2025, buyers of new battery-electric vehicles priced at £40,000 or more will also be subject to this supplement.
From April 1, 2025, anyone purchasing a new vehicle will face higher vehicle excise duty (commonly referred to as first-year road tax). The revised rules will see road tax costs double for all new cars emitting 76g/km of CO2 or more, with the highest-polluting vehicles experiencing the steepest price increases.
Currently, EVs are exempt from road tax, but as of April 1, 2025, registered keepers of electric cars will be required to pay road tax, just like petrol and diesel vehicle owners.
In April 2017 the expensive car supplement was introduced as an additional charge for drivers of vehicles that originally cost more than £40,000. This fee is applied alongside their annual or monthly road tax payments.
Under the original rules, electric and zero-emission vehicles were exempt from this luxury vehicle tax. However, starting April 1, 2025, all newly registered cars with a list price over £40,000—including electric vehicles—will be required to pay the expensive car supplement from the second year of ownership for a total of five years.
The higher luxury vehicle tax takes effect on April 1, 2025, so if you’re considering buying a new car priced at £40,000 or more—especially an electric vehicle (EV)—you may want to do so before the end of March to avoid the increased costs.
From April 1, the expensive car supplement will increase from £410 to £425 per year for the first five years (starting after the initial tax payment in year two).
For those purchasing an EV over £40,000, buying on or before March 31, 2025, could result in a £2,125 road tax savings over a six-year ownership period.
At Ocean we want all of our customers to understand the costs they are paying and always offer transparent advice and information, so you are in the best decision to choose the vehicle that is right for you, your needs and your finances.