A Shock for British Drivers
British motorists are bracing for a financial jolt in 2025 as Chancellor Rachel Reeves rolls out a sweeping overhaul of Vehicle Excise Duty (VED), introducing a record-breaking first-year car tax hike. The most polluting petrol and diesel vehicles will now be slapped with a staggering £5,490 in first-year VED—a nearly 100% increase from previous rates. It’s a move being described by critics as a stealth tax on mobility, while supporters frame it as a much-needed push toward a greener, cleaner future.
For context, a high-emission SUV that previously cost around £2,700 in first-year tax could now see that figure double. Drivers who have yet to transition to electric vehicles (EVs) may feel they’re being penalized. But make no mistake—this is not just about cars. It’s about the UK government signaling that the age of petrol and diesel is entering its final chapter.
What the New Tax Policy Aims to Achieve
The official line from the Treasury is that this tax reform is part of a broader strategy to “strengthen incentives for the transition to zero-emission vehicles.” In other words, make it more painful to buy traditional cars and more appealing to go electric. It’s a carrot-and-stick approach—but the stick just got a lot bigger.
Rachel Reeves has positioned this as both an environmental and economic maneuver. With government spending pressures mounting and the clock ticking on climate targets, this tax serves dual purposes: disincentivize fossil-fuel vehicles and generate much-needed revenue. But at what cost to the average British driver?
Full Breakdown of the 2025 Vehicle Excise Duty (VED) Changes
VED Rates Based on CO₂ Emissions
Here’s a detailed look at how the VED bands have changed based on carbon dioxide (CO₂) emissions. As of April 1, 2025, these are the first-year rates for newly registered vehicles:
| CO₂ Emissions (g/km) | 2025 First-Year VED |
|---|---|
| 0 | £10 |
| 1-50 | £110 |
| 51-75 | £130 |
| 76-90 | £270 |
| 91-100 | £350 |
| 101-110 | £390 |
| 111-130 | £440 |
| 131-150 | £540 |
| 151-170 | £1,360 |
| 171-190 | £2,190 |
| 191-225 | £3,300 |
| 226-255 | £4,680 |
| Over 255 | £5,490 |
This is a seismic jump, especially for performance cars, luxury SUVs, or heavy-duty vehicles that emit over 255g/km. Just a few years ago, these cars were considered symbols of prestige and power. In 2025, they’re a symbol of carbon guilt—with a hefty price tag to match.
Comparing 2024 vs. 2025 VED
To understand the full impact, let’s compare last year’s top band to this year’s:
- 2024 Top VED Rate (Over 255g/km): £2,745
- 2025 Top VED Rate (Over 255g/km): £5,490
That’s a 100% increase overnight.
This change hits at the point of purchase—the first year of ownership—making it immediately painful for buyers of traditional vehicles. And with the rising cost of living, fuel prices, and insurance, adding another few grand in taxes could make some vehicles unaffordable for the average family.
Who Gets Hit the Hardest?
Impact on Petrol and Diesel Vehicle Owners
Let’s get real—this policy doesn’t hit every motorist equally. If you’re still planning to buy a petrol or diesel car in 2025, and it’s anything more than a small city car, prepare for your wallet to take a serious beating.
The brunt of the cost falls on:
- High-emission diesel SUVs
- Luxury saloons with powerful petrol engines
- Performance vehicles (even those marketed as “eco performance”)
It’s also worth noting that this isn’t just about luxury. Tradespeople and rural residents who rely on diesel-powered 4x4s for work or travel are now staring down thousands in additional taxes. For many, EVs are not yet viable due to cost or lack of charging infrastructure—so this feels like a financial penalty without a real alternative.
Real-Life Examples: Models Facing the Max VED
Here are just a few vehicles that will fall into the £5,490 bracket:
- BMW X5 M60i xDrive (262g/km)
- Range Rover Sport P530 (over 255g/km)
- Mercedes-AMG GLE 63 S (around 280g/km)
These cars are already priced in the luxury segment, but this hike makes them even more unattainable—and for business owners or executives who rely on fleet vehicles, the tax bill is now a major factor in buying decisions.
What About Electric Vehicles?
EVs Now Taxable – A Major Policy Shift
Up until now, electric vehicles have been exempt from VED entirely. That free ride ends in 2025.
- First-Year VED for EVs (2025): £10
- Standard Rate (from Year 2): £195 annually
This may seem like a modest amount, but it’s a sign that EVs are no longer the untouchables in government tax policy. As EV adoption climbs, the government is looking for ways to ensure they also “pay their way.”
Expensive Car Supplement: High-End EV Owners Targeted
The biggest twist? EVs with a list price over £40,000 will now be subject to an additional £425 per year in “expensive car supplement” for five years. This includes popular high-end EVs like:
- Tesla Model S
- BMW i7
- Audi Q8 e-tron
- Lucid Air
So even if you’re going green, if you’re doing it in style—you’ll still pay a premium.
