Changes to VED and how it will affect you

Driver Guides  HMRC / Tax 

The government has adjusted Vehicle Excise Duty (VED) rates following the most recent Budget (March) and those changes have now come into effect.

Alongside the announcement that fuel duty will remain frozen – and we’re all glad for that – from April VED increased by around 10% in line with inflation.

VED remains aligned to a car’s emissions, so in the first year of registration VED costs somewhere between £10 and £2,745 depending on the level of emissions associated with your chosen vehicle. The lower brackets haven’t changed but the top bracket of £2,745 represents an increase of £140 on last year.

It is in the following years that the main changes take place when a flat rate applies. For years 2-6 VED has risen to £190 per year (previously £180 pa) while alternative fuel cars - which includes hybrids - pay £180 (again a £10 rise on the previous year).

For cars costing in excess of £40,000 there is an additional £410 to pay in years 2-6. if you drive an emissions free vehicle (ie a purely electric car) your annual VED rate is £0 and the premium vehicle supplement does not apply.

Unfortunately, all of that will change from next April.

Zero emission cars registered on or after 1 April 2025 will be liable for the lowest rate of £10 per year for the first year. From the second year of registration, they will move to the standard rate which currently stands at £165 per year. On top of that, the exemption for the premium supplement will also be ending so if your EV costs more than £40,000 you’ll also have to pay the extra tax for five years as well.

Since many of the EVs currently on the market cost in excess of £40,000 this will affect drivers opting for an electric vehicle, although there are plenty of newer and less expensive electric cars coming to market - such as the Dacia Spring.

VED is included in all the leasing deals that Gateway2Lease offers, but from next year it will slightly increase the cost of those rentals to reflect the new VED rates.

You can find the latest VED rates here on the government website.

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