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April is just around the corner. As well as the promise of longer days, and all the joys that spring brings, it is also the start of a new tax year. This year, there are several vehicle tax changes – including electric vehicle tax, VED increases, and changes for commerical vehicles. Fleet operators and business owners managing multiple vehicles should be aware of potential increases in operating costs – especially for high-emission vehicles.
Changes to Vehicle Excise Duty
Vehicle Excise Duty (VED) – car tax or road tax – is essentially a tax for using a vehicle on public roads in the UK. Vehicle tax bands are based on engine size, fuel type, and CO2 emissions, depending on when the vehicle was first registered. Vehicle excise duty rates are due to increase for all types of vehicles from April 2025.
Tax on Electric Vehicles
If your fleet includes electric vehicles (EV), it’s important to be aware that all EV owners will be required to pay the standard rate of road tax—£195 annually—after 1 April 2025. The government has announced that this rate will rise in line with the retail price index (RPI) in the future. New zero-emission vehicles will also be subject to the lowest first-year VED rate, currently £10. This first-year rate will be in place until at least 2029/30.
There are more changes in store for EVs. Those over £40,000 will also be subject to the Expensive Car supplement of £410 (more on this below). The Benefit-in-Kind (BIK) tax rate for EVs will rise incrementally by 1% each year. And, from December 2025, EVs and hydrogen fuel cell vehicles will need to pay the London Congestion Charge of £15.
Tax for petrol and diesel vehicles
The first-year tax (often known as showroom tax) for low, moderate or high emissions of petrol and diesel vehicles is also set to change. The tax on Low-emission hybrid (1-50 g/km CO2) vehicles will increase from £10 to £110. Tax on moderate-emission vehicles (51-75 g/km CO2) is set to rise from £30 to £130, and tax on high-emission vehicles (76+ g/km CO2) is due to double. The second-year rate for petrol and diesel cars remains unchanged at £190 per year.
Expensive Car Supplement
The Expensive Car Supplement is an additional charge of £425 for cars with a list price of over £40,000 – payable for five years from the date of the first VED car tax payment. Until now, electric vehicles have been exempt from the Expensive Car Supplement. New zero-emission cars with a list price of £40,000 or more will be subject to a £425 per year supplement for five years.
Changes to BIK
The Benefit-in-Kind (BIK) tax rate for EVs, which was fixed at 2% until 2025, will rise incrementally by 1% from 2025/2026 to 2027/2028 and then by 2% annually to reach 9% in 2029/2030. percentages for all other cars will rise by 1% annually, up to a maximum of 39% in 2029/2030. Also, starting in April 2025, double cab pick-ups will be treated as cars for tax purposes rather than commercial vehicles.
Vehicle advisory fuel rates
Advisory fuel rates – the rates used to reimburse employees for the cost of business travel – were increased from 1 March 2025. The cost per mile has increased for petrol cars with an engine size of up to 1,400cc (from 14p to 15p) and diesel cars with an engine size of up to 1,600cc.
What about vans and commercial vehicles?
Vehicle excise duty for commercial vehicles (vans and pick-up trucks) is simpler because there is a flat rate. From 1 April, the rate will increase in line with the retail price index (RPI) to £345 – a £10 increase. Electric van owners must also pay the flat rate VED on their vehicles from 2025 onwards.
Are you looking for a way to offset tax increases?
In 2024, customers of The Fuel Store saved an average of 10.7ppl off forecourt fuel prices. Whether you have one vehicle or a whole fleet, the savings soon add up. This year, we’re introducing a brand new tool, which will help fleet operators and businesses optimise tax efficiency, streamline payroll reporting, and reduce admin. The result? Transparent mileage claims for employees, simplified tax and NI calculations for payroll teams, and verified cost savings. More info coming soon.