More than a million drivers dragged into paying more car tax next year

More than a MILLION drivers face a car tax hike in April - after Chancellor Rachel Reeves delivered her Labour Party Budget. The government is setting rates for Company Car Tax (CCT) for 2028-2029 and 2029-30 to provide long term certainty for taxpayers and industry.

CCT rates will continue to strongly incentivise the take-up of electric vehicles, while rates for hybrid vehicles will be increased to align more closely with rates for internal combustion engine (ICE) vehicles, to focus support on electric vehicles.

The government will change the VED First Year Rates for new cars registered on or after 1 April 2025 to strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine (ICE) cars, too.

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Until 2029-30, electric cars will pay the lowest first year VED rates of just £10. But for the second year, electric cars will have to pay a flat standard VED rate (that all cars pay) which is currently set at £190 for petrols and diesels and £180 for hybrids.

Electric vehicles will be subject to a charge of £10, a figure the Government claims will be frozen until the 2029-30 tax year. Hybrid owners will also see an increase in road tax, with vehicles making between one and 50g/km of carbon dioxide being charged £110 and drivers of cars that produce 51-75g/km paying £130.

Iain Reid, Head of Editorial for the used vehicle retail platform Carwow, added: "While they’re no longer exempt from vehicle excise duty from April 2025, electric cars will be subject to more favourable first-year tax rates than petrol and diesel-powered cars.

"However rather than incentivising electric car ownership, it looks like she is disincentivising ownership of other types with big increases in VED rates and a big increase in Benefit in Kind for hybrid cars coming in 2028."