By Rob Hull
Updated: 05:28 AEDT, 31 October 2024
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Rachel Reeves will introduce a stealth tax on new petrol and diesel cars from next year that will see buyers stung with road tax costs of up to almost £5,500.
During her Budget statement, the Chancellor said the Government will change Vehicle Excise Duty first year rates for new cars registered 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 cars'.
However, the Budget document confirms that Ms Reeves will try to force drivers to choose greener vehicles by not only guaranteeing low first-year VED rates for EVs but by doubling them for all cars emitting more than 76g/km CO2.
One expert labelled it as a 'shove, not a nudge' towards an electric car future.
With every traditional petrol and diesel car on sale having higher emissions than this, it means buyers face hiked first-year road tax costs of between £270 and a staggering £5,490.
The Chancellor's new tax hike to call time on combustion engines cars: The Budget document reveals that Rachel Reeves will DOUBLE first-year VED rates for new petrol and diesel models, meaning road tax costs as high as £5,490
The Chancellor said the government will change VED first year rates to 'strengthen incentives to purchase zero emission and electric cars, by widening the differentials between zero emission, hybrid and internal combustion engine cars'
The Budget document reveals that all zero-emission electric cars will pay the lowest first-year tax rate - commonly referred to as the 'showroom tax' - of just £10.
This will be retained until 2029-30 to incentivise drivers to switch to greener cars, with the Labour government standing by its manifesto promise to ban the sale of new petrol and diesels in 2030.
To also encourage motorists to buy hybrid models in the interim, new examples with emissions between 1 and 50g/km CO2 (which will almost entirely be plug-in hybrid variants) next year will be subject to £110 first-year VED rates.
For plug-in and conventional hybrids emitting between 51 and 75g/km CO2, the showroom tax in 2025-26 will be £130.
Steve Gooding, director of the RAC Foundation, described the move as 'less of a nudge and more of a shove to change buyer behaviour in the showroom'.
He said while it might appear to be an effective way of incentivising buyers to go electric, it could simply see drivers keep their older, more polluting cars for longer.
Nicholas Lyes, IAM RoadSmart director of policy and standards, said that increasing VED on all but zero emission vehicles in the first year will 'hit those buying new conventional vehicles in the pocket'.
He added: 'A better solution to incentivise the take-up of electric vehicles would have been to cut VAT on the sale of new electric vehicles with list price of £40,000 and under.'
Also commenting on the stealth tax on new petrol and diesel cars, Paul Barker, editor at car magazine Auto Express, said: 'Doubling first-year VED rates for anything over 76g/km alongside big hikes for non-EVs below that adds a notable cost, especially for high-polluting cars over 255g/km that will now cost almost £5,500 in first-year VED alone.'
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