Incoming VED car tax rise for 2024/25 to strengthen the EV case

If low charging costs, a smooth driving experience, low company car rates and zero tailpipe emissions weren’t enough to sell you on EVs, a new rise in car tax for petrol and diesel models now means going electric is more appealing than ever.

HM Revenue and Customs (HMRC) has confirmed that in 2024, Vehicle Excise Duty (VED), also known as road tax, will rise in-line with the Retail Price Index’s (RPI) current rate of inflation. The result of this is that some drivers will end up incurring an additional £100 to their already-high tax bills.

Exact figures are yet to be confirmed, however, finance expert, Pete Barden, suggests that the base annual rate of road tax will rise from £180 to £190. That’s not all, as the ‘luxury’ car tax — which concerns vehicles costing more than £40,000 from new — is expected to also rise, meaning that it could cost well over £600 per year to tax a run-of-the-mill petrol family SUV.

Furthermore, the initial first-year VED tax rate, which is based on the tailpipe CO2 emissions of a particular vehicle, will see a rise almost across the board; the base rate of £10 will stay the same, but the most polluting of cars will now be liable to a £2,745 tax bill, compared to £2,605 in 2023. 

Of course, electric cars still escape all of these added costs; EVs and other zero-emissions vehicles (ZEVs) are exempt from road tax until April 2025, meaning EV owners will have a little more cash in their wallets for at least another year. From then on, we expect electric cars to incur the base rate of road tax, with top models potentially escaping the aforementioned ‘luxury’ surcharge.

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