When Chancellor Jeremy Hunt announced in his Spring Budget statement last month that fuel duty would remain frozen for a fourteenth consecutive year – and the 5p cut on tax on petrol and diesel would remain for another 12 months – drivers and businesses breathed a sigh of relief.
But while the Government has refrained from hiking taxes on fuel, there’s still a sting on motorists that came into effect on 1 April… Vehicle Excise Duty.
VED – or car tax, as it’s often referred – went under the radar in the Budget. Like most years, an increase in rates in-line with the Retail Price Index was buried in the official document and means the cost of taxing a car is likely to increase for most drivers over the next 12 months.
How do the VED increases impact you? We have detailed all the changes based on the age of the car you drive…
How will car tax hikes impact you in 2024/25? Find out how much extra – if any – in Vehicle Excise Duty you’ll be paying on your motor this year
I AM BUYING A BRAND NEW CAR REGISTERED AFTER 1 APRIL 2024
When motorists buy a new car, they are stung with a first year tax rate – also known as a ‘showroom tax rate’ – based on the CO2 emissions of the vehicle they purchase.
After this first year showroom tax, owners will then have to pay a fixed-price standard tax rate (which you can find in the next section below).
The impact of the latest RPI hike has increased VED for every car buyer bar those purchasing fully-electric and plug-in hybrids vehicles that emit less than 50g/km CO2.
And some of the increases drivers will experience are significant.
For buyers of the latest petrol and diesel cars with carbon emissions up to 150g/km, they can expect pay between £5 and £35 more than they would have done before 1 April.
Anyone buying a new motor with CO2 emission above 150g/km will be forced to pay an extra £35 to £140, with the most polluting models clobbered by a first-year showroom tax rate of £2,745.
If you drive a diesel car that fails to meet the Real Driving Emissions 2 (RDE2) standards for nitrogen oxide emissions, there is a supplementary charge. You can ask your car’s manufacturer if your car meets the RDE2 standard, though the Gov.uk payment website will automatically identify this and apply the additional charge.
| Emissions (g/km) CO2 | Petrol cars and diesel cars (TC49) that meet the RDE2 standard | Annual increase | All other diesel cars (TC49) | Annual increase | Alternative fuel cars (TC59) | Annual increase |
|---|---|---|---|---|---|---|
| 0 | £0 | £0 | £0 | £0 | £0 | £0 |
| 1-50 | £10 | £0 | £30 | £0 | £0 | £0 |
| 51-75 | £30 | £0 | £135 | £5 | £20 | £0 |
| 76-90 | £135 | £5 | £175 | £10 | £125 | £5 |
| 91-100 | £175 | £10 | £195 | £10 | £165 | £10 |
| 101-110 | £195 | £10 | £220 | £10 | £185 | £10 |
| 111-130 | £220 | £10 | £270 | £15 | £210 | £10 |
| 131-150 | £270 | £15 | £680 | £35 | £260 | £15 |
| 151-170 | £680 | £35 | £1,095 | £55 | £670 | £35 |
| 171-190 | £1,095 | £55 | £1,650 | £85 | £1,085 | £55 |
| 191-225 | £1,650 | £85 | £2,340 | £120 | £1,640 | £85 |
| 226-255 | £2,340 | £120 | £2,745 | £140 | £2,330 | £120 |
| Over 255 | £2,745 | £140 | £2,745 | £140 | £2,735 | £140 |
I OWN A CAR REGISTERED BETWEEN 1 APRIL 2017 AND 31 MARCH 2024
If you own a car that was first registered between 1 April 2017 to 31 March 2024, the RPI hike will also translate to an increase in standard rate car tax, which is paid from the car’s second year onwards.
This has been upped by £10, rising from £180 to £190 for petrol and diesel models and increasing from £170 to £180 for ‘alternative fuel vehicles’ (hybrids and plug-in hybrids).
The standard rate of VED for zero-emission electric vehicles (EVs) bought during this period is wavered, but EVs will face taxation from next under new rules proposed by Mr Hunt in 2022.
Motorists who spend over £40,000 on a new car are stung with an additional premium tax that impacts the amount of VED the pay for the first 5 years at the standard rate – this year, the cost of this premium tax has risen by £20
As well as increasing the standard rate for vehicles with a combustion engine, there has also been a hike to the additional ‘premium’ rate tax on all models purchased after 1 April 2017.
This premium rate impacts all cars that cost more than £40,000 when they were new and is paid on top of the standard rate for five years (from year two to year six).
This premium tax was introduced in 2017 and has proven an unwelcome hit to the pockets of motorists purchasing larger models, particularly expensive SUVs.
And the cost of this ‘expensive car’ tax has risen by £20-a-year from £390 to £410 as of 1 April.
Looking back to the previous VED rates for 2022/23, the premium tax was £355, meaning it has increased by £55 in two years.
It means owners of petrol or diesel cars dating back to 2018 with a ‘list price’ (the published price before any discounts) of more than £40,000 will be forking out a whopping £600 in standard rate tax this year, irrelevant of if it produces low CO2 or extremely high levels of carbon dioxide.
Hybrid owners get a £10-a-year discount, meaning owners of £40k-plus models pay £590 for the year 2023/24.
Electric car owners are currently exempt from this premium taxation for now, but likely won’t be from 2025 when owners of battery-powered vehicles are forced to start paying annual VED.
| Fuel type | Standard tax rate for cars costing less than £40,000 | Annual increase | Standard tax rate for cars costing more than £40,000 | Annual increase |
|---|---|---|---|---|
| Petrol or diesel | £190 | £10 | £600 | £30 |
| Alternative fuel (hybrid) | £180 | £10 | £590 | £30 |
| Electric | £0 | £0 | £0 | £0 |
| *models with a ‘list price’ (the published price before any discounts) of more than £40,000 to pay an additional premium tax of £390 for the first 5 years of the standard rate | ||||
From 1 April 2024, drivers of vehicles registered over seven years ago can expect to have to pay an extra £10 to £40 a year in higher car taxation
I OWN A CAR REGISTERED BETWEEN 1 MARCH 2001 AND 31 MARCH 2017
For older petrol and diesel cars registered between March 2001 and March 2017, your vehicle will continue to be classified by lettered VED bands based on CO2 emission outputs.
The impact of the the latest RPI increase from 1 April impacts all cars in this age bracket with CO2 emissions in excess of 121g/km CO2.
Annual VED costs will rise between £10 and £40.
It means the most polluting models with CO2 emissions over 255g/km will be forced to splash out £735 annually on car tax.
| VED Band | CO2 emissions (g/km) | Standard rate* for petrol and diesel cars | Annual increase | Standard rate* for alternative fuel vehicles | Annual increase |
|---|---|---|---|---|---|
| A | Up to 100 | £0 | £0 | £0 | £0 |
| B | 101-110 | £20 | £0 | £10 | £0 |
| C | 111-120 | £35 | £0 | £25 | £0 |
| D | 121-130 | £160 | £10 | £150 | £10 |
| E | 131-140 | £190 | £10 | £180 | £10 |
| F | 141-150 | £210 | £10 | £200 | £10 |
| G | 151-165 | £255 | £15 | £245 | £15 |
| H | 166-175 | £305 | £15 | £295 | £15 |
| I | 176-185 | £335 | £15 | £325 | £15 |
| J | 186-200 | £385 | £20 | £375 | £20 |
| K** | 201-225 | £415 | £20 | £405 | £20 |
| L | 226-255 | £710 | £35 | £700 | £35 |
| M | Over 255 | £735 | £40 | £725 | £40 |
| **Includes cars emitting over 225 g/km registered before March 23, 2006 | |||||
I OWN A CAR REGISTERED BEFORE 1 MARCH 2001
If you own a car that’s more than 23 years old – registered before 1 March 2001 – you will also need to pay more in car tax this year.
VED for cars this old is split into just two bands based on engine size – up to 1.55 litres and over 1.55 litres.
For those in the lower group, the rise is £10 a year, up from £200 to £210. For the larger engine capacities, ministers have hit them with a £20 increase, rising from £325 to £345 from 1 April 2024.
| Engine size | Standard rate* for petrol and diesel cars | Annual increase |
|---|---|---|
| Up to 1549cc | £210 | £10 |
| Over 1549cc | £345 | £20 |
I OWN A CAR THAT’S OVER 40 YEARS OLD
Under VED rules, any car that was registered over 40 years ago is no longer hit with car tax.
That means all cars registered before April 1984 is already eligible for ‘historical vehicle taxation’ exemption.
However, it is important to note that it is a vehicle keeper’s responsibility to apply to the DVLA for a vehicle tax exemption so they can issue an updated log book to clarify that the car is eligible for charge-free historic vehicle tax.
You can find how to apply for historic vehicle tax on the Gov.uk site.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
