Rachel Reeves Announces New Car Tax Changes, Impacting Millions of Drivers

Startin today, drivers across the UK will face higher Vehicle Excise Duty (VED) rates, as new tax changes introduced by Chancellor Rachel Reeves officially come into effect. These changes, which were first outlined in the Autumn Budget, will affect petrol, diesel, electric, and hybrid vehicle owners.

The average increase will be around £5 annually, but for drivers of higher-polluting vehicles, the hike could be as much as £40 per year. The adjustments, which are in line with inflation, are expected to place additional financial pressure on households already dealing with rising motoring costs.

Under the new rates, vehicles registered between March 2001 and April 2017 will see an increase based on their carbon dioxide emissions. For instance, vehicles in the 121-130g/km bracket will now pay £170, up from £165, while those producing between 226 and 255g/km of CO2 will now face a £40 increase, bringing the annual fee to £760.

A significant change also impacts electric vehicles (EVs), which were previously exempt from VED. Starting in April 2025, all new EVs will pay the same £200 annual rate as petrol and diesel vehicles, marking a major shift in the government’s tax policy for green vehicles.

Experts have warned that these increases, coupled with the rising costs of fuel, insurance, and maintenance, may add to the financial strain on drivers across the UK. With motoring costs having risen by nearly 60% in the last decade, many are bracing for the additional burden this tax hike will bring.