Budget 2025: car tax band changes

Chancellor Rachel Reeves has announced important changes to the car tax system in the UK as part of the Autumn Budget 2025.

Pay-per-mile road tax for electric car drivers

From April 2028, drivers of electric and plug-in hybrid cars will pay more tax, with a new pay-per-mile eVED (Electric Vehicle Excise Duty) system being introduced,

Under the new rules, electric car drivers will pay 3p per mile while plug-in hybrid drivers will pay 1.5p per mile.

According to the Government, the average electric car driver (driving 8,000 miles a year) will pay an extra £240 per year alongside the existing Vehicle Excise Duty (VED) rate.

At this stage it is not clear how the eVED system will operate. The Government has said it is dedicated to 'protecting motorists’ privacy', which means that there will be no requirement to report where and when miles are driven or install trackers in cars.

Instead, it's expected that drivers will need to have their mileage checked around the first and second registration anniversary of their car.

It is not clear how these checks will be performed or who will be responsible for administering them - but it is likely MOT test centres will be expected to assist in some form.

Expensive Car Tax Supplement threshold increases to £50,000 for EVs

The Expensive Car Supplement (also known as the luxury car tax) threshold has increased from £40,000 to £50,000 for EV buyers.

It officially take effect from 1 April 2026, but also applies to electric cars registered from 1 April 2025 onwards.

As a result, if your electric car was first registered after 1 April 2025 and has a list price that does not exceed £50,000, you will not be required to pay the 'luxury car tax', which adds £425 a year and takes the total annual VED up to £620.  

How much is my car tax in 2025?

For most drivers, the cost of car tax in 2025 is £195. If your vehicle had a list price that exceeded £40,000 when it was first sold (or £50,000 if your car is electric) then you may also be liable for the 'luxury car tax' fee, which adds £425 to the vehicle's annual VED costs - taking it up to £620.

You may pay less or more if your car was first used before 2017. The exact fee for your annual road tax will boil down to the year your car was first registered and the type of fuel it uses. 

Electric cars no longer qualify for free road tax.