Chancellor’s stealth tax on new petrol and diesel cars: First year VED rates to DOUBLE next year to a whopping £5,490

Rachel Reeves will introduce a stealth tax on new petrol and diesel cars from next year, leaving buyers facing road tax costs of up to almost £5,500.

During her Budget statement, the Chancellor said the Government will change vehicle excise duty rates for the first year for new cars registered after April 1, 2025 to “strengthen incentives to buy zero-emission and electric cars, by addressing the differences between zero-emission , hybrid and combustion engines’. motor cars’.

However, the budget document confirms that Ms Reeves will try to force drivers to choose greener vehicles by not only guaranteeing low first-year VED rates for electric vehicles, but doubling them for all cars emitting more than 76g/km of CO2 .

One expert labeled it a “nudge, not a nudge” toward an electric car future.

Because every traditional petrol and diesel car on sale has higher emissions, this means buyers will face higher road tax costs of between £270 and as much as £5,490 in the first year.

The Chancellor said the government will change the VED rates for the first year to “strengthen incentives to buy zero-emission and electric cars, by widening the differences between zero-emission, hybrid and combustion engine cars.”

The budget document shows that all zero-emission electric cars will pay the lowest first year tax rate – commonly called ‘showroom tax’ – of just £10.

This will be maintained until 2029-2030 to encourage motorists to switch to greener cars, with the Labor government sticking to its manifesto pledge to ban the sale of new petrol and diesels by 2030.

To also encourage motorists to buy hybrid models in the meantime, new examples with emissions between 1 and 50 g/km of CO2 (which will be almost entirely plug-in hybrid variants) will be subject to £110 first-year VED next year rates.

For plug-in and conventional hybrids emitting between 51 and 75 g/km of CO2, the showroom tax will be £130 in 2025-2026.

But in a blatant attempt to discourage drivers from buying new petrol and diesel cars, the current first year VED rates applied to these vehicles will be doubled.

As such, buyers will incur huge costs, especially those buying large family models and especially anyone buying heavy, gas-guzzling SUVs and supercars.

“All other rates for cars emitting 76 g/km of CO2 and above will double from their current levels between 2025 and 2026,” the document said.

The lowest first year VED rate for petrol and diesel with emissions of 76-90g/km is currently £135.

However, from April 1, this will double to £270.

Even for relatively economical new cars with combustion engines emitting between 101 and 110 g/km of C02, road tax costs will rise to £390 in the first year from the previous £195.

Families buying a modest Nissan Qashqai with a 1.3-litre mild-hybrid petrol engine will face a first-year VED charge of £540 from April 1

A family buying a brand new 1.3-litre mild-hybrid petrol Nissan Qashqai (which emits 144g/km of CO2) would have to pay an extra £540 in the first year (up from £270) under the new rules.

But the biggest pain will be for the buyers of the most polluting vehicles.

Any petrol or diesel car with emissions of 191-225 g/km of CO2 will increase to £3,300 in the first year (from £1,650). This would include a new diesel mild-hybrid Range Rover, which has claimed CO2 emissions of 194g/km.

Buyers of a diesel mild-hybrid Range Rover emitting 194g/km of CO2 will face a £3,300 showroom tax

Performance cars will be hit very hard by the tax changes. A BMW M4 – which emits between 226 and 230g/km of CO2 – costs £4,680 in tax in the first year

The highest first-year VED rates apply to the most polluting new petrol and diesel cars that emit more than 255 g/km of CO2, such as the Lamborghini Urus super SUV. Buyers from April 1 will have to pay no less than €5,490 in road tax for the first twelve months

The initial VED cost for a brand new vehicle emitting 226-255g/km of CO2 will increase to £4,680 (from £2,340). This would catch up with cars like BMW’s latest M4 performance coupe, which emits between 226 and 230 g/km of CO2.

The biggest increase will be for motorists buying new petrol and diesel cars with CO2 emissions above 255g/km, which will cost as much as £5,490 in the first year alone (up from £2,745). This will be delivered by a number of supercars, as well as Lamborghini’s super SUV, the Urus.

Changes to the VED will generate £400 million for the Treasury, Reeves told MPs during her statement.

From a car’s second year onwards, all models are subject to a standard VED rate, which is currently £190 for petrol and diesel engines and £180 for hybrids. A lower standard rate is also expected to apply to electric cars from next year.

Steve Gooding, director of the RAC Foundation, described the move as ‘less of a nudge and more of a nudge to change purchasing behavior in the showroom’.

He said that while it appears to be an effective way to encourage buyers to go electric, it could simply lead to drivers leaving their older, more polluting cars for longer.

Nicholas Lyes, director of policy and standards at IAM RoadSmart, said increasing the VED on all but zero-emission vehicles in the first year will “hit those buying new conventional vehicles in the pocket.”

He added: ‘A better solution to encourage the uptake of electric vehicles would have been to reduce VAT on sales of new electric vehicles with a list price of £40,000 or less.’

Commenting on the stealth tax on new petrol and diesel cars, Paul Barker, editor at car magazine Auto Express, said: ‘A doubling of VED rates in the first year for anything over 76g/km, alongside big increases for non -EVs below that, adds a notable increase. costs, especially for highly polluting cars over 255g/km, which will now cost almost £5,500 VED in the first year alone.”