Starting from April 2025, a significant increase in Vehicle Excise Duty (VED) rates will impact numerous petrol and diesel cars, including luxury brands like Audi, BMW, and Mercedes. This change follows the UK Government’s decision to raise first-year VED fees for higher-emission vehicles, aiming to promote the transition to electric vehicles (EVs).
New Tax Rates and Their Impact on Car Owners
Under the updated system, first-year VED fees for new petrol and diesel models will rise substantially. The exact tax paid is determined by the car’s carbon dioxide (CO2) emissions, with models emitting over 255 g/km facing a steep hike.
For instance, the first-year tax for high-emission vehicles such as the Range Rover could increase to £5,490—more than double the current rate of £2,745. Meanwhile, electric vehicles (EVs) will continue to benefit from a minimal first-year charge of just £10.
Aims to Encourage the Shift to Electric Vehicles
The government’s decision to impose higher taxes on petrol and diesel cars is part of its broader strategy to reduce carbon emissions and accelerate the adoption of EVs. As Chancellor Rachel Reeves explained in her Budget statement, these measures are designed to strengthen incentives for consumers to purchase zero-emission vehicles, as well as increase the differentiation in taxes between conventional internal combustion engine (ICE) cars and EVs.
What Does This Mean for Luxury Car Brands?
Luxury car brands, including Porsche, Lamborghini, Ferrari, and McLaren, will also be significantly affected by the new VED structure. Models such as the Lamborghini Huracan and Porsche 911 are among the vehicles that will face the highest tax increases. Owners of these high-performance cars could see first-year VED fees rise by up to £2,745, depending on the emissions.
Tax Increases in Practice
For example, the first-year VED fee for a Ford Puma will increase from £220 to £440. On the other end of the spectrum, a new Ford Mustang or Aston Martin DBX, with their larger engines and higher emissions, could incur a tax bill of over £2,000 for the first year. This increase in taxation is expected to further shift the automotive market towards hybrid and electric vehicle options.
With the changes due to take effect in April 2025, the goal is clear: to encourage drivers to opt for cleaner, greener alternatives. As the Treasury points out, zero-emission vehicles will continue to enjoy substantial financial benefits through low or no VED fees, as well as 100% first-year allowances for EVs and EV charging points.
New models emitting over 255 g/km
- Alfa Romeo: Stelvio 2.9 V6 Bi-Turbo
- Aston Martin: DB12 4.0 V8, DBX 4.0 V8, Vantage 4.0 V8
- Audi: R8 5.2 FSI V10, RS6 4.0 TFSI V8, RS7 4.0 TFSI V8, RSQ8 4.0 TFSI V8, S8 4.0 TFSI V8, SQ7 4.0 TFSI V8, SQ8 4.0 TFSI V8
- Bentley: Bentayga 4.0 V8, Continental 4.0 V8, Continental 6.0 W12, Flying Spur 4.0 V8
- BMW: Alpina XB7 4.4 V8, M8 4.4 V8, X5 M 4.4 V8, X6 M 4.4 V8, X7 M 4.4 V8
- Chevrolet: Corvette Stingray 6.2 V8
- Ferrari: Purosangue 6.5 V12, Roma 3.8T V8
- Ford: Mustang 5.0 V8, Ranger 2.0 TD EcoBlue, Ranger 3.0 EcoBlue, Ranger 3.0 V6
- INEOS: Grenadier 3.0P
- Jaguar: F-Pace 5.0 P575 V8
- Jeep: Wrangler 2.0 GME
- Lamborghini: Huracan 5.2 V10, Revuelto 6.5 V12, Urus 4.0 V8 BiTurbo
- Land Rover: Defender 110 5.0 P425 V8, Defender 90 5.0 P425 V8
- Lotus: Emira 3.5 V6
- Maserati: Levante 3.0 V6, Levante 3.8 V8, MC20 3.0 V6
- McLaren: GT 4.0T V8
- Mercedes-Benz: AMG GT 4.0 V8, G400D, G63, GLC63, GLE63, GLS63h, SL55
- Porsche: 718 Cayman 4.0 GT4, 911 3.7T 992 Turbo, Cayenne 4.0T V8, Macan 2.9T V6
- Range Rover: 4.4 P530 V8, 4.4 P615 V8, Sport 4.4P V8
- Rolls-Royce: Cullinan 6.75 V12, Ghost 6.75 V12
- Toyota: Hilux 2.8D, Land Cruiser 2.8D
- Volkswagen: Amarok 3.0 TDI
These new measures set to take effect in 2025 will further solidify the UK’s commitment to combating climate change and incentivizing eco-friendly transportation choices.
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