A long unavoidable cost attached to owning and operating a vehicle, VED has been evolving our the years to account for environmental policy and changes to technology. From April 2025 we'll see the next big set of changes.
It's getting ever so complicated as the vehicle’s CO₂ emissions, fuel type (petrol, diesel, electric or alternative fuels), and whether the vehicle is new (first licence) or has been previously registered are taken into account to figure out what to pay (Once a vehicle had passed into its second year of registration, owners pay a standard annual rate).
Not only that, but the registration date of the vehicle will mean the relevant tax tables are to be looked up - new vehicles since 2024 or legacy vehicles prior to April 2017!.
The 2025 VED rules aim to account more precisely for environmental impact. Here are the major differences between 2024 and 2025:
Revised CO₂ Emission Bands for First Licence Vehicles:
One of the most significant updates is how the first-year VED is calculated for vehicles registered on or after 1 April 2025. The new system assigns rates strictly based on specific CO₂ emission bands. For example:
- Vehicles with 0 g/km emissions will now pay a first-year rate of just £10.
- Light-emission vehicles (1–50 g/km) see a jump to £110.
- Vehicles emitting between 51–75 g/km are subject to a tax of £130.
- As emissions increase, the rates continue to rise steeply, with those emitting over 255 g/km being charged as much as £5,490.
The new approach marks a move away from some of the complexities of the previous tables, where fuel type (petrol, diesel, or alternative) also influenced the rate. In 2025, for new registrations, the emphasis is primarily on the CO₂ output. This simplifies the process for new vehicles and provides a clearer incentive for manufacturers to produce cleaner models.
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Standard Rate for Subsequent Licences:
After the first year, vehicles that remain on the road will be subject to a new standard annual rate. Under the 2025 system, this rate is set at a flat £195 regardless of emissions, which is a change from the more segmented 2024 bands. However, there’s an important caveat: if the vehicle’s list price exceeds £40,000, it will incur an additional Expensive Car Supplement of £410 per year for its first five years (starting from the second licence). Previously, certain vehicles—most notably electric cars—benefited from an exemption from this supplement, but that exemption is ending with the new rules.
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Impact on Electric Vehicles and Alternative Fuels:
In 2024, electric vehicles and other low-emission alternatives were often incentivised through either lower tax bands or supplementary exemptions. With the 2025 changes, new zero-emission vehicles, despite their environmental credentials, will have a first-year rate of just £10. However, once these vehicles move past their first year, they will be subject to the standard flat rate plus the Expensive Car Supplement if they have a list price over £40,000. This shift is intended to create parity between all high-specification vehicles, regardless of their fuel type, as the government adjusts its revenue models and aims for a fairer contribution from every vehicle on the road.
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Considerations for Legacy Vehicle Owners:
There are changes for vehicles registered before 1 April 2017 (legacy vehicles) too. Many of these have been taxed using older tables that vary according to CO₂ emission bands. In 2025, owners of legacy vehicles will see a recalibration of these rates. The new tables have been designed to harmonize with the changes for newer registrations while still recognizing the age and usage patterns of older vehicles. Consequently, there are updated calculations for vehicles registered between 1 March 2001 and 31 March 2017, with slight adjustments for those that fall into the legacy bands.
For the cynics, the changes come as a time where there is increasing pressure on public funds, so these changes can also be viewed as a means of generating additional revenue. The revised rates, particularly the steep increases for higher emitting vehicles, are likely designed to align with broader economic policies.