New car tax change to have 'serious' impact on motorists with £410 warning

Drivers are being notified that upcoming changes to vehicle taxation could lead to hefty charges for new car buyers, especially those interested in a specific model type.

Starting from April 2025, electric car owners will be subjected to road tax for the first time, and several of the most favoured models will also incur a luxury car tax.

Auto Trader's Editorial Director, Erin Baker, emphasised that this revision might cause potential electric car buyers in the UK to reconsider.

Baker commented: "While it is unlikely that the additional luxury car tax has had much of an impact on people's car purchase decisions since 2017, this may be about to change.

"With two thirds of all electric vehicles having a price point of over £40,000, this will make switching to a zero-emissions vehicle less appealing knowing that road taxes are higher, on top of the initial investment."

Although previously exempt to foster a transition away from petrol or diesel vehicles, electric car drivers will face Vehicle Excise Duty (VED) costs commonly known as road tax from April 2025, reports the Express. Nonetheless, due to the prevalence of expensive battery packs which thrust many models beyond the £40,000 bracket, they become liable for luxury car tax.

Consequently, these owners will have to handle an extra £410 on top of the standard VED charge for the initial five years of registration within the UK, suggesting that total yearly taxation on drivers could surge up to £600.

Erin recommended that to dodge the extra charges, drivers could think about leasing an electric car, which would distribute the luxury car tax cost over time.

She said: "For drivers that are looking at making the switch to an electric vehicle over the next few years and are more concerned about not only the upfront cost as well as the newly implemented vehicle tax costs, car leasing is a good option to consider.

"Electric vehicles also offer attractive total cost ownership benefits, so they might actually be more economical than a petrol car."

Auto Trader informed that motorists opting for a Personal Contract Hire (PCH) or Business Contract Hire (BCH) lease will still face the luxury car tax. However, this tax is included in the monthly vehicle payments, allowing drivers to avoid a large one-time fee. They also pointed out that car companies often present a monthly amount comprising the tax, ensuring there wont be any surprise costs.