Thousands of drivers hit with major car tax change from today – here’s who’s affected

Significant changes to rates of vehicle excise duty (VED) – often referred to as road tax – came into effect on 1 April 2025 with electric cars targeted, especially those costing over £40,000.

Previously, fully electric cars were exempt from VED, but from 1 April buyers of new electric cars will have to pay £10 – the lowest rate of first-year VED – for the first year before it steps up to the standard rate of £195 from the second year onwards.

In addition to that, electric cars with prices over £40,000 will attract an additional tax known as the expensive car supplement or luxury car tax. This additional tax adds another £425 to the cost of VED from the second year onwards, putting the price of taxing an EV up to £620 per year, with the expensive car supplement applicable for years two to six.

The £40,000 mark includes the value of any options, so a car with a base price of £39,995 plus an additional cost for metallic paint, for example, will still be in line for the expensive car supplement.

British brand Vauxhall is the first car maker to react to the new tax, reducing the cost of its most expensive models so they all sit under the £40,000 price point. That means, for example, a new all-electric Vauxhall Grandland now costs £39,995 (down £600) but only with the one free-of-charge paint colour. Adding metallic paint takes the car back above £40,000, making it eligible for the expensive car supplement.

It's a similar story with the Vauxhall Astra ST, with the top-spec car reduced by £700 this time to the same £39,995 – again in just one colour.

Commenting on the expensive car supplement, Eurig Druce, managing director of Vauxhall, said “the threshold for the Expensive Car Supplement has remained at £40,000 since its inception in 2017 despite subsequent high levels of inflation – if it were to have risen with inflation it would now be around £52,000.

“With the average price of an EV in the UK at around £48,000, this new tax means that customers buying some of the more attainable electric cars on the market are now being penalised, while at the same time we are trying to move as many British motorists to electric as quickly as possible. The good news is that Vauxhall electric customers are below this new threshold, but we’d urge the government to reconsider this new measure and ensure taxation policies incentivise the majority of drivers to make the shift to electric vehicles.”

Fully electric cars registered registered between 1 March 2001 and 31 March 2017 will now have to pay £20 per year, with cars registered between 31 March 2017 and 31 March 2025 having to pay the standard rate of VED of £195 also applicable to internal combustion-engined cars.