VED changes affecting fleets in 2025

As we settle into 2025, it is important to consider changes coming into effect this year. The last Budget announcement in October 2024 revealed several key changes to tax rates – in particular Vehicle Excise Duty (VED).

The Office for Budget Responsibility estimates that ￡9.4 billion in VED will be raised by 2027/28. This is an increase on the ￡7.3 billion collected for the 2022-23 tax year.

Yahoo News has produced a helpful article to navigate the changes. It says that a key element to understanding how you will be affected by VED is your vehicle’s registration date.

The latest changes to VED will apply only to those vehicles registered after 1 April 2017 when the current tax system was implemented. Cars registered before this date will continue to pay rates under the old system. For the first time, electric vehicles will lose the benefit of certain exemptions.

All cars in the UK are subject to two different rates of VED:

• ‘Showroom tax’, payable for the first year after a vehicle is purchased. This rate is calculated with the vehicle’s cO2 output taken into consideration. So, heavier polluting vehicles pay a higher rate than lesser polluting vehicles.
• Standard VED, payable annually thereafter at the standard rate.

New first-year VED rates:

• Zero emission cars will pay ￡10 first-year VED until 2029-30
• Cars emitting 1-50 g/km of CO2, including hybrid vehicles, will increase dramatically from ￡10 to ￡110 for 2025-2026
• Cars emitting 51-75 g/km of CO2, including hybrids, will increase to ￡130
• All other rates for cars emitting 76 g/km of CO2 and above will double from their current level.

A newly registered Range Rover, for example, could be taxed in the mid-five figures for first-year VED. Often, this figure is included within the cost of purchasing a vehicle.

The second-year rate will remain the same for all petrol and diesel cars at ￡190.

Classic cars that are over 40 years old continue to be exempt from road tax, along with vehicles used by those with a disability, cars used to transport passengers with a disability and agricultural vehicles such as tractors.

You can read the full article from Yahoo News here.