Millions of drivers have been warned they will "bear the brunt" of Rachel Reeves's car tax hikes next week, which will see costs skyrocket.
From Tuesday, April 1, drivers across the UK will face increased Vehicle Excise Duty (VED) rates, with electric car owners set to be impacted the most by the changes as their long-standing tax exemption comes to an end.
The standard annual road tax rate will rise from £190 to £195, affecting most vehicles registered since April 2017, according to the DVLA.
Electric and hybrid vehicles will also now be taxed at the same rate as their petrol and diesel counterparts at £195 for cars and £345 for vans.
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However, first-year tax rates for higher-polluting vehicles will double, with luxury cars in the highest emission band facing a staggering £5,490 bill. Cars like the Bentley Continental W12, Porsche 911 Turbo, and Land Rover Defender V8 will all be subject to this cost hike.
The changes, originally announced by former Chancellor Jeremy Hunt in 2022, have caused widespread confusion among motorists due to the complex tax system in place.
Research by LeaseCar UK revealed the financial strain these changes will place on motorists, with the average cost of car ownership having increased by 84 per cent since 2014. Vehicle tax has seen the most dramatic rise of all ownership costs, with a staggering 578 per cent increase over the past decade.
Matt Walters, Head of Consultancy Services and Customer Value, at Ayvens said: "New cars bear the brunt of tax changes. This has left fleets and private motorists in the dark about a tax policy that could cost electric vehicle drivers an additional £1,300 over a four-year lease contract."
Meanwhile, popular models like the Nissan Juke and Volkswagen Golf now cost 68 per cent and 65 per cent more to own, respectively, than they did ten years ago.
Electric vehicles registered from April 1 will also be subject to the Expensive Car Supplement of £425 if they cost more than £40,000. This will apply from the second to the seventh year of ownership.
When the threshold was first introduced in 2015, it only impacted five per cent of new vehicle registrations. However, it now "disproportionately impacts" EVs, with around 64 per cent of cars priced above the £40,000 mark.
The Autumn Statement had promised an adjustment for EVs in a "future fiscal event", but the Treasury has yet to announce any changes, with many disappointed with the lack of measures introduced at the Spring Statement.
The flat VED rate for electric vans will also be equalised with petrol and diesel models and backdated to include all vehicles registered since March 2001.
This change affects an estimated 90,000 electric vans on UK roads, amounting to a £31million tax burden for British businesses. Industry experts warn that it comes as the UK's electric van market is already stalling, with 2024's market share barely changing year-on-year.
First-year taxes for low-emission vehicles producing between one and 50g/km of CO2 will rise to £110, a significant increase from the previous rates. Hybrid cars in this band, which includes most plug-in hybrids, previously paid no road tax in the first year, whilst petrol and diesel cars in the same band paid just £10.
Walters added: "Despite growing pressure on fleets to reduce CO2 emissions, operators are facing challenges with reduced payload and range, charging networks with spaces designed for cars, and additional administrative burdens for the largest vans."
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Richard Evans, head of technical services at webuyanycar, explained: "You can re-tax your car at any time, even if your current cover isn't due to expire for months. If you re-tax your EV before March 31 you can enjoy another year's tax-free motoring," he explains, potentially saving drivers £195."
Find Out More...
From Tuesday, April 1, drivers across the UK will face increased Vehicle Excise Duty (VED) rates, with electric car owners set to be impacted the most by the changes as their long-standing tax exemption comes to an end.
The standard annual road tax rate will rise from £190 to £195, affecting most vehicles registered since April 2017, according to the DVLA.
Electric and hybrid vehicles will also now be taxed at the same rate as their petrol and diesel counterparts at £195 for cars and £345 for vans.
Do you have a story you'd like to share? Get in touch by emailing [email protected]
However, first-year tax rates for higher-polluting vehicles will double, with luxury cars in the highest emission band facing a staggering £5,490 bill. Cars like the Bentley Continental W12, Porsche 911 Turbo, and Land Rover Defender V8 will all be subject to this cost hike.
The changes, originally announced by former Chancellor Jeremy Hunt in 2022, have caused widespread confusion among motorists due to the complex tax system in place.
Research by LeaseCar UK revealed the financial strain these changes will place on motorists, with the average cost of car ownership having increased by 84 per cent since 2014. Vehicle tax has seen the most dramatic rise of all ownership costs, with a staggering 578 per cent increase over the past decade.
Matt Walters, Head of Consultancy Services and Customer Value, at Ayvens said: "New cars bear the brunt of tax changes. This has left fleets and private motorists in the dark about a tax policy that could cost electric vehicle drivers an additional £1,300 over a four-year lease contract."
Meanwhile, popular models like the Nissan Juke and Volkswagen Golf now cost 68 per cent and 65 per cent more to own, respectively, than they did ten years ago.
Electric vehicles registered from April 1 will also be subject to the Expensive Car Supplement of £425 if they cost more than £40,000. This will apply from the second to the seventh year of ownership.
When the threshold was first introduced in 2015, it only impacted five per cent of new vehicle registrations. However, it now "disproportionately impacts" EVs, with around 64 per cent of cars priced above the £40,000 mark.
The Autumn Statement had promised an adjustment for EVs in a "future fiscal event", but the Treasury has yet to announce any changes, with many disappointed with the lack of measures introduced at the Spring Statement.
The flat VED rate for electric vans will also be equalised with petrol and diesel models and backdated to include all vehicles registered since March 2001.
This change affects an estimated 90,000 electric vans on UK roads, amounting to a £31million tax burden for British businesses. Industry experts warn that it comes as the UK's electric van market is already stalling, with 2024's market share barely changing year-on-year.
First-year taxes for low-emission vehicles producing between one and 50g/km of CO2 will rise to £110, a significant increase from the previous rates. Hybrid cars in this band, which includes most plug-in hybrids, previously paid no road tax in the first year, whilst petrol and diesel cars in the same band paid just £10.
Walters added: "Despite growing pressure on fleets to reduce CO2 emissions, operators are facing challenges with reduced payload and range, charging networks with spaces designed for cars, and additional administrative burdens for the largest vans."
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Richard Evans, head of technical services at webuyanycar, explained: "You can re-tax your car at any time, even if your current cover isn't due to expire for months. If you re-tax your EV before March 31 you can enjoy another year's tax-free motoring," he explains, potentially saving drivers £195."
Find Out More...