Following the recent Autumn Budget 2024, significant changes to Vehicle Excise Duty (VED) and the Expensive Car Supplement (ECS)—commonly known as the "Luxury Car Tax"—are set to take effect from 1st April 2025.
These changes will impact all new vehicles, including electric cars, and could result in higher costs for new vehicles. While these updates are not yet finalised, we expect confirmation from the government in late March so now is the time to act to avoid potential tax increases!
Key Changes from 1st April 2025
- First-year VED rates will increase across all vehicle types.
- The standard VED rate (from year 2 onwards) will rise to £195 per year.
- Electric Vehicles (EVs) priced over £40,000 will be subject to the Expensive Car Supplement (ECS), adding £425 per year for five years.
- No price protection will be available, as these tax rates are set by the government.
Breakdown of the First-Year VED Increases
The government will introduce new legislation in Finance Bill 2024-25 to adjust VED rates as follows:
- Zero-emission vehicles: £10 for the first year (until 2029/30).
- Low-emission vehicles (1-50g/km CO₂, including hybrids): £110.
- Medium-emission vehicles (51-75g/km CO₂, including hybrids): £130.
- Higher-emission vehicles (76g/km CO₂ and above): Rates will double compared to current levels.
The Expensive Car Supplement – What You Need to Know
From April 2025, all new vehicles with a list price exceeding £40,000 will incur an additional charge of £425 per year for five years on top of the standard VED rate. This includes fully electric cars (EVs), marking a significant shift in taxation policy.
For example, an electric car registered after 1st April 2025 could cost an additional £2,125 in tax over five years due to this change.
What Should You Do?
With these increases on the horizon, March 2025 presents a key opportunity to secure a new vehicle before the new tax rates take effect.
Final Thoughts
While these changes are still awaiting final confirmation, it’s crucial to prepare now.
The team at Ancaster Group is here to support customers in making informed decisions ahead of the tax increases.
If you’re considering a new vehicle purchase, contact us today to secure your new car at the current rates.
