What changes are happening to Road Tax in April 2025?
The Chancellor of the Exchequer previewed changes in the Autumn budget (2024) that would heavily impact the automotive industry. The changes that were announced relate to charges levied against motorists and would come into play from April 1st, 2025. We’ve summarised these changes below as they may impact your buying decision and how they affect car leasing.
What’s Changed?
As of April 1st 2025, the following changes come into force:
- Electric cars (EV) that are registered from April 1st or afterwards will be subject to the lowest current rate of vehicle excise duty (VED) – This is currently set at just £10 for the first year.
- In the second year of registration the annual rate will move in line with some other vehicles, charged at £195 per year (assuming you pay annually)
- Full electric, also known as zero emission cars registered after 1st April 2017 and before 1st April 2025 will also move up to the standard rate of annual tax, £195 per year as above if paid annually in full.
- New electric cars that exceed £40,000 P11d that are registered after April 1st 2025 will no longer exempt from the expensive car supplement, also known as luxury car tax.
- Electric cars registered before 1st April that excess £40k will continue to be exempt.
- Electric vans will also be punished, moving to match petrol and diesel cars (normally £345 per year)
How is VED calculated and what is included in the 40k Expensive car supplement?
Road tax is calculated based on the manufacturer reported Co2 emissions in year one, plus the list price of the vehicle for subsequent years.
What does the list price include?
- Manufacturer retail price of the vehicle (discounts from dealers are not taken into consideration)
- The full retail price of any options, including Paint, wheels, interior trim, packs etc.
- Delivery charges, including pre delivery inspection, but not including onward delivery across water (for example additional cost for a ferry crossing)
- Value Added Tax (VAT)
What is not included when calculating the list price of new cars?
- Warranty, service packs or insurances
- Dealer fit accessories, such as roof box or luxury car mats
- Modifications for accessibility or for disabled drivers
- First registration fee and the cost of year 1 RFL.
Full list of changes announced by the Chancellor to come into play from April 1st 2025.
- New zero emission (EV) cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to cars with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £195 a year when paid in full in advance.
- Zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate, when paid in full in advance.
- The Expensive Car Supplement exemption for electric vehicles is due to end in 2025. New zero emission cars registered on or after 1 April 2025 will therefore be liable for the expensive car supplement. EVs registered before 1 April 2025 will continue to be exempt from the Expensive Car Supplement. The Expensive Car Supplement currently applies to cars with a list price exceeding £40,000 for 5 years. (See above for what qualifies for the 40k)
- Zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year when paid in full in advance.
- Zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently £345 a year for most vans
- Zero emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year
- Rates for Alternative Fuel Vehicles and hybrids will also be equalised
The information supplied is to be used as a guide only - Please refer to the DVLA for additional information and to verify your RFL liability. Ready2Lease provide this information with as much accuracy as possible, but cannot be held liable for any inaccuracies.
