Starting in 2025, UK drivers are set to face significant changes to their Vehicle Excise Duty (VED), with some popular family cars set to see tax increases of up to £600. The new VED bands, announced by the Labour Party government, will affect a wide range of vehicles, from hybrids to electric cars, and could have a major impact on how much drivers will need to pay each year. While the government is emphasizing its push for greener vehicles, the updated tax structure raises important questions for those who may not be ready to make the switch to an electric or hybrid car.
Understanding the New VED Bands
The introduction of the new VED bands in 2025 is part of the government’s ongoing efforts to incentivize electric and hybrid car adoption while making it financially more challenging to own higher-emission vehicles. This shift will impact those who drive popular family vehicles, with some seeing a £600 increase in tax.
The updated tax rules will affect all new car purchases, but the most significant changes will be felt by drivers of hybrid vehicles. Drivers of these cars will face an increase in their road tax between £135 and £327, depending on the model they purchase. Meanwhile, those who opt for fully electric vehicles (BEVs) will see a much smaller rise, with only a £10 increase in their tax rates. However, electric car owners may still be hit with another surprise in the form of the “Expensive Car Supplement” (ECS).
The Impact of the Expensive Car Supplement (ECS)
Electric vehicle (EV) owners will also be impacted by the new ECS, which is expected to add £410 to the annual road tax for any electric vehicle worth over £40,000. This additional tax is set to affect a wide range of popular electric cars, including the Kia EV9, Volkswagen ID Buzz, and BMW iX.
While the tax hike may not significantly affect most petrol or diesel cars, the landscape is changing for electric vehicles. According to Erin Baker, editorial director at Auto Trader, “While the ECS hasn’t significantly affected petrol or diesel car sales, the landscape may change for electric vehicles.” With around two-thirds of EVs now costing more than £40,000, the additional road tax could make them less appealing to potential buyers. However, Baker also offers a solution for those who want to keep the cost down. “Leasing offers a practical solution. The ECS is automatically incorporated into the monthly payments, making it simpler for drivers to manage the added costs.”
This shift in policy could have a significant impact on the EV market, potentially reducing the demand for electric cars. While many buyers may still find the environmental benefits appealing, the increased tax burden could deter some consumers from making the switch.
Popular Family Electric Vehicles Facing Higher Costs
Several well-known electric family cars will fall under the new VED bands, with the price thresholds pushing them into the higher tax brackets. These vehicles include:
- Kia EV9 – £62,775
- Volkswagen ID Buzz – £59,035
- BMW iX – £60,178
- BMW i5 – £61,016
- Tesla Model Y – £46,990
- Volkswagen ID.3 – £49,295
- Kia Niro EV – £42,445
As these prices are all above the £40,000 threshold, owners of these cars will be subject to the additional ECS, resulting in a substantial increase in their annual road tax.
Expert Insights on How to Minimize the Impact of the Tax Increase
The new VED bands are set to increase the cost of owning a new car, especially for those purchasing electric and hybrid models. However, there are ways that car buyers can reduce the financial impact of these changes.
Tom Banks, a car insurance expert at Go.Compare, offers several practical suggestions for drivers looking to minimize the effects of the increased VED rates. “The increased VED rates mean most new car buyers will be paying a lot more than they were expecting in 2025, but there are ways you can minimise the impact this will have on your finances.” One option for buyers is to consider purchasing a low-emission car that falls into the cheaper tax bands.
“If you can’t purchase a suitable hybrid or EV, consider opting for a nearly new vehicle instead,” Banks advises. “This gives you that new car feeling for a fraction of the price, and will allow you to dodge the increased tax.” Buying a nearly new car could be an effective way to avoid paying the higher tax rates while still getting a newer vehicle.
Moreover, Banks highlights additional strategies to offset the increased costs. “See if there are any other ways you can reduce your motoring spending to make up for the increased tax costs. For example, comparing car insurance policies might allow you to find a provider that offers the same level of cover for a lower price, and driving in a way that minimises your fuel usage could help to reduce costs further.”
Navigating the VED Changes in 2025
The introduction of the new VED bands in 2025 represents a significant change in the UK’s road tax system, with electric and hybrid vehicle owners seeing increased costs due to the new ECS. For those purchasing family cars, the impact will be felt most strongly by those opting for electric vehicles priced over £40,000. While the government’s push for greener vehicles is important for the future of the environment, the tax increases will certainly affect buyers’ decisions in the short term.
For those looking to minimize the impact of these changes, there are several strategies, such as purchasing a low-emissions vehicle, considering a nearly new car, or reducing other motoring costs. Buyers should also stay informed about the changes in VED rates to better manage the additional financial burden.
With the increased tax burden, the landscape of car ownership in the UK may shift, especially for electric vehicles. As Erin Baker noted, “The landscape may change for electric vehicles,” but consumers still have options to make their car ownership experience more affordable.
how about cyclists being taxed and insured they use the roads and cause accidents they should also take a test they take get away with a the misuse of the highway code