DVLA to hit 2 million drivers with new car tax rates from next year

There will be new car tax rates to hit two million drivers next year as the DVLA announced significant changes to the Vehicle Excise Duty (VED). The changes will come into play in Spring and will hit electric vehicle (EV) owners.

They will now be required to pay car tax, ending a period of exemptions that have been in place for drivers of electric vehicles. This will come as a shock to UK drivers who had been incentivised to choose electric vehicles because of the exemption.

The DVLA's strategic plan for 2024/25 repeatedly mentions the VED updates set to take effect from April next year and was introduced in the 2022 Autumn Budget by the Conservatives.

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The DVLA's strategic plan states: "We will deliver the Vehicle Excise Duty technical changes required for electric vehicles and low emission vehicles which will take effect from 1 April 2025."

It also notes: "During the year, we will continue to invest in our digital transformation programme, and in delivering the changes required to support the collection of Vehicle Excise Duty for electric and low-emission vehicles."

Rates that EV owners would incur have not been announced but it is anticipated that they may face the same charges as petrol and diesel vehicle owners, which currently stand at £190 annually.

However, In her Autumn Budget statement, Chancellor Rachel Reeves outlined proposals to adjustments to VED rates, indicating that EV owners might soon be seeing reduced costs compared to those driving combustion engine cars.

The Autumn Budget report elaborates: "To help drive the transition to electric vehicles (EVs) the government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars."

A closer look at the proposal reveals Labour's intention to freeze the lowest first-year rate (FYR) for zero-emission vehicles until 2029-30, while increasing FYR for other vehicle bands, including hybrids and internal combustion engine vehicles, starting in 2025-26.

This policy could not only bring in an additional £15 million during 2024-25 but also have the potential to generate £415 million from 2025-26 onwards.

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