A change in the first-year rates of VED will push up costs for new car buyers, with diesel drivers the hardest hit.
The increased fees mean drivers will spend a collective additional £162.9m if the same number of vehicles are bought in the first six months of the new tax year as this tax year, according to calculations by Go.Compare car insurance.
The increased first-year rates – so-called ‘showroom tax’ – will start from April next year.
Go.Compare reviewed Department for Transport figures on the number of new private vehicles registered in the first half of the 2024 tax year. It applied the existing and upcoming first-year rates for VED to these vehicles to estimate how much more new car buyers could pay next year if buying habits remain the same.
It found that diesel drivers will be hit hardest by the tax changes, as the tax rates continue to be based on the vehicle’s CO2 output. Diesel cars’ higher emissions tend to place them in the top bands for VED, meaning buyers could face an eye-watering average increase of £1,113 per vehicle – more than double the rise facing petrol drivers.
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In total, diesel buyers will pay an additional £26.1m towards the tax if the same number are bought in the first six months of the financial year.
Petrol car buyers will spend an extra £89.4m on the tax overall, equating to an average of £503 per car more, the second-highest rise of any fuel type.
All new car buyers will see a tax increase, although the amount will be much lower for those who buy greener vehicles. Hybrid drivers will pay between £135 and £327 extra towards the tax depending on the type they buy, while those who choose a battery electric vehicle (BEV) will only need to spend an additional £10.
Tom Banks, car insurance expert at Go.Compare, said: “The increased VED rates mean most new car buyers will be paying a lot more than they were expecting in 2025, but there are ways you can minimise the impact this will have on your finances. For instance, consider purchasing a low-emissions car that will place your vehicle in the cheaper tax bands.
“If you can’t purchase a suitable hybrid or EV, consider opting for a nearly new vehicle instead. This gives you that new car feeling for a fraction of the price, and will allow you to dodge the increased tax.
“Otherwise, see if there are any other ways you can reduce your motoring spending to make up for the increased tax costs. For example, comparing car insurance policies might allow you to find a provider that offers the same level of cover for a lower price, and driving in a way that minimises your fuel usage could help to reduce costs further.”
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