New car tax and VED bands for electric car drivers kick in from April – Birmingham Live
Drivers face new VED rates and bands for electric cars in 2026 under the Labour Party government. Pete Barden has predicted VED fees are likely to rise by around 4.6% next year, with standard rate fees, first-year charges and Expensive Car Supplement fees all set to rise.
The move could see electric car owners paying up to £20 more to use the road in a blow to those making the switch. The expert said: "While road tax, or as it is officially known as VED, or vehicle excise duty is paid on all conventional cars – and hybrid cars now – fully electric cars are currently exempt from paying any road tax at all.
"However, Chancellor Jeremy Hunt has already confirmed that electric car owners will have to pay road tax – or Vehicle Excise Duty (VED) as it is officially known – from April 2025."
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Former Conservative Party Chancellor Mr Hunt said previously: "Because the OBR (Office for Budget Responsibility) forecast half of all new vehicles will be electric by 2025, to make our motoring tax system fairer I've decided that from then, electric vehicles will no longer be exempt from vehicle excise duty."
Pete Barden said: "Business car tax rates will also get a discount for those using electric vehicles.
"Currently, zero-emissions vehicles do not have to pay the £165 standard rate of road tax or the £335 supplement that cars costing more than £40,000 are charged, but with the huge increase in such cars being purchased, the chancellor will be aware of Treasury predictions the drivers turning to electric cars could cost £7billion in lost tax revenues."
Pete Barden said: “The latest figures from the Office for National Statistics confirm that the headline inflation level held steady at 3.8% in September 2025, the same as in August.
“While the Government typically bases VED rises on the Retail Prices Index (RPI) rather than CPI, the two measures tend to move in similar directions – and RPI is still expected to hover around 4.6% for September, according to forecasts from analysts.
“That means drivers should brace for another inflation-linked rise in road tax from April 2026, with costs for new and existing vehicles likely to climb by a similar percentage – around 4.6%.”
New zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year.
The Expensive Car Supplement currently applies to cars with a list price exceeding £40,000 for 5 years.
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