New car tax bands under Labour mean 'wider difference' in what drivers pay

Major car tax changes launching next year will see British drivers pay more with new rate hikes. In the Labour Party Budget yesterday, the Chancellor Rachel Reeves moved to reassure drivers and pledged to strengthen incentives to purchase electric cars.

It will be done by widening the differentials in Vehicle Excise Duty (VED) first year rates between EVs and hybrids or internal combustion engine cars. The Government has now published company car tax tables for an additional two years, up to 2029/30.

Vehicles with CO2 emissions of 1g to 50g per kilometre will have appropriate percentages of 18% in 2028/29 and 19% 2029/30. Zero emission cars will pay the lowest first year rate at £10 until 2029-30. Rates for cars emitting 1-50g/km of CO2, including hybrid vehicles, will increase to £110 for 2025-26.

READ MORE Petrol and diesel drivers being handed free £130 from today under Labour

Rates for cars emitting 51-75g/km of CO2, including hybrid vehicles, will increase to £130 for 2025-26. All other rates for cars emitting 76g/km of CO2 and above will double from their current level for 2025-26. Reacting to the Budget car tax changes, John Cassidy, director of sales at Close Brothers Motor Finance, added: "The Government will maintain existing incentives for EVs in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025.

"The desired effect of the measure will not only be to stimulate demand for new BEVs, but also to boost demand for used EVs and support the residual values of electric cars, which have fallen by 60 per cent in the last 22 months in the UK.

"Importantly, the Government has pledged to match this tax break with a like-for-like investment in electric charging infrastructure across the country, which at present is failing to meet requirements."