Drivers have been urged to brace for a change in road tax that will affect more than a million cars on the UK roads following the Autumn Budget.
Whilst the first Labour Budget in 14 years featured several sharp tax rises, Chancellor Rachel Reeves introduced a number of incentives to boost the sale of electric vehicles.
Announcing her first Budget in the House of Commons, the Chancellor noted that one of these measures would be a different tax rate when compared to petrol or diesel models.
She explained: “I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first year rates of Vehicle Excise Duty from April 2025.
“These measures will raise around £400 million by the end of the forecast period.”
Whilst the Labour Government ruled out introducing a pay-per-mile system of taxation ahead of the Budget, electric car owners will be charged road tax for the first time from April 2025.
During the first year, electric vehicles will be subject to a charge of £10, a figure the Government claims will be frozen until the 2029-30 tax year.
Hybrid owners will also see an increase in road tax, with vehicles making between one and 50g/km of carbon dioxide being charged £110 and drivers of cars that produce 51-75g/km paying £130.
In comparison, petrol and diesel models will also see a significant rise in the price owners will need to pay in the car’s first year on the roads.
Smaller superminis that produce between 111 to 130g/km of CO2, such as the Volkswagen Polo and Citroen C3, will need to pay £440 – double the amount drivers currently face.
Larger vehicles that make between 131 to 150g/km will be subject to a charge of £540, whereas those producing between 150 and 170g/km will face a staggering £1,360 charge.
New vehicles with a list price of £40,000 will also be subject to the luxury car tax of £410 for the first five years it is on the road.
Iain Reid, Head of Editorial for the used vehicle retail platform Carwow, supported the move to make tax figures for electric cars lower than petrol and diesel models, but is concerned it could lead to sharper rises in the future.
He added: “While they’re no longer exempt from vehicle excise duty from April 2025, electric cars will be subject to more favourable first-year tax rates than petrol and diesel-powered cars.
“However rather than incentivising electric car ownership, it looks like she is disincentivising ownership of other types with big increases in VED rates and a big increase in Benefit in Kind for hybrid cars coming in 2028.”