Six new law and rule changes in 2025 that will affect UK drivers

Drivers face higher taxes in the new year

Drivers should be aware of six key changes that will come into effect during 2025.

Many motorists will face paying higher taxes in the new year, as first-year VED rates will increase significantly and electric car drivers will start paying the tax for the first time. Meanwhile, the government has plans to make it easier for drivers to find the cheapest fuel. Motorists will soon be able to use navigation apps and comparison sites to see up-to-date petrol and diesel prices at all UK service stations.

In London, there will be major changes to who pays the congestion charge which comes into force in December. And drivers who believe they may have received mis-sold car finance will discover the results of an investigation into the practice in May this year. It could mean thousands of drivers receiving compensation.

These are the six key things drivers should know heading into the new year.

EV drivers to start paying taxes as first-year VED rates rise

Drivers of electric vehicles (EV) will have to pay vehicle excise duty (VED) for the first time from next spring.

Currently, electric vehicle drivers do not have to pay anything to tax their vehicle. But from April 1, electric vehicle drivers will have to pay VED. The move was first announced by former Conservative chancellor Jeremy Hunt in 2022.

New electric vehicles, registered from 1 April, will have to pay the lowest VED rate for the first year – £10 a year. Then, from the second year of registration onwards, they will move to the standard VED rate, currently £190 a year. Electric vehicles registered for the first time before April 1 next year will pay the standard rate.

The expensive car supplement exemption for electric vehicles will also end, meaning electric cars registered on or after April 1 will have to pay an extra charge of £410 a year. It currently applies to cars worth more than £40,000 and must be paid for the first five years.

Other motorists will also have to pay higher VED rates from April as first-year tax rates for drivers of new petrol, diesel and hybrid vehicles will rise significantly.

The VED increase is part of the government’s attempts to push consumers towards electric cars, while widening the tax gap between the “most polluting” vehicles and electric ones.

The tax figure for the first year of a car is calculated taking into account the amount of CO2 it produces. Currently, cars emitting between 111 and 150g/km pay £220, while those emitting more than 255g/km pay £2,745 for the first year. Starting in April 2025, non-electric vehicle drivers will see VED rates increase significantly in the first year, with most doubling from the current rate.

A Treasury spokesperson told Car Dealer Magazine that the change means that, from April next year, a new Ford Puma driver can expect a VED rate increase in the first year from £220 to £440, while A Range Rover buyer could pay as much as £5,490 (up from £2,745) in that first year of ownership.

Electric cars will start paying the congestion charge in London

Currently, electric vehicle owners can apply for an exemption to avoid having to pay the £15 congestion charge in London. This is called a “cleaner vehicle discount.”

It costs £10 to apply for the discount, which lasts for a year before needing to be renewed.

However, starting December 25, 2025, the cleaner vehicle discount will be discontinued. From this date, all vehicle owners will have to pay to enter the congestion charging zone, unless they are eligible for another discount or exemption, according to Transport for London.

‘Fuel Finder’ program to facilitate the search for cheap gasoline and diesel

The government previously announced plans for new regulations that will require all fuel retailers to publish fuel prices so drivers can find the cheapest petrol and diesel.

According to the Competition and Markets Authority (CMA), the new system will help to reinvigorate competition within the fuel sector, reducing prices for UK drivers.

Currently, places that sell gasoline and diesel to drivers are only required to provide price information at the service stations themselves, making it difficult for drivers to compare prices. The ‘Fuel Finder’ program will allow drivers to compare fuel prices in real time, through navigation applications, on-board devices and comparison websites.

The government said it plans to have the plan up and running by the end of 2025.

Sarah Cardell, chief executive of the CMA, said: “We need to reignite competition between fuel retailers and that means two things. “It needs to be easier for drivers to compare up-to-date prices so retailers have to compete harder for your business. This is why we recommend that the UK government legislate for a new fuel lookup system that would force retailers to publish their prices in real time.

“This would end the need to drive around and look at prices displayed on the forecourt and ideally allow for live pricing data on satnavs and mapping apps. Given the importance of this market to millions of people across the UK , this must be backed by a new fuel monitoring feature that will hold the industry to account.”

Investigation into financing of wrongly sold cars will present its conclusions

The outcome of a major investigation into the mis-selling of car finance will be known in May 2025, which could result in thousands of drivers being awarded compensation.

The Financial Conduct Authority (FCA) is investigating car finance deals that contained so-called “discretionary commission arrangements” (DCA), which allowed car dealers to adjust the interest offered to customers to increase their commission. The regulator banned DCAs in January 2021, but is now investigating whether affected drivers could be compensated.

Money-saving expert Martin Lewis has suggested that those who may be entitled to compensation pending the results of the investigation include purchasing a car, van or motorcycle for personal use for financial purposes before January 28 of 2021.

If the FCA decides compensation should be made, it is not yet clear how much money drivers could receive. Their figures suggest drivers paid £1,100 more interest on a typical £10,000 four-year car finance deal when there was a discretionary commission deal.

Lewis previously recommended filing a complaint sooner rather than later, in case a deadline is later imposed that could cut off any future complaints.

DVSA plans to reduce driving test waiting times

Ministers recently announced plans to reduce waiting times for driving tests, including training hundreds more driving examiners and additional fees for people making last-minute cancellations.

In December 2024, the Driver and Vehicle Standards Agency (DVSA) revealed its seven-point plan to tackle long waits and students having to pay more for tests booked by third parties trying to make a profit.

The DVSA said it plans to hire and train 450 driving examiners. It also said it will increase the period to change or cancel a trial without losing money from three business days to 10 business days early, meaning more people will be charged for late cancellations.

The DVSA said there will also be changes to the system used by driving instructors to book tests in a bid to free up more places, as well as a call for tests to examine how to prevent third parties from ripping off candidates by buying places.

The DVSA chief has said the measures will help “make the driving test booking system fairer for students, better protecting them from exploitation and continuing to provide them with the tools to help them pass the test”.

Loveday Ryder, chief executive of the DVSA, said learner drivers, instructors and other members of the industry will be asked for their views on the booking system and other processes “so we can better understand their needs and gather evidence before any changes are made.” . “

Higher taxes for company car drivers

Drivers of company cars will have to start paying higher taxes from April 2025. Tax rates called benefits in kind (BIK), which apply to people who are provided with a car by their employer, will start to increase. increase from the beginning. of the new fiscal year after being frozen since 2022.

Starting in April, BIK rates will increase by 1 percent in each tax bracket. For example, electric vehicle drivers will pay 3 percent, up from 2 percent currently. BIK rates are higher for cars that emit more CO2. The highest rate is currently 37 per cent for cars producing more than 154g/km.