UK car tax keeps moving, and that's a bigger problem than the rate

Is the real cost of a car in Britain the tax you pay, or the tax you can't predict? After Chancellor John Healey's Budget, we lean toward the second answer.

The April 2027 rise is boring, and that's the good news

AOL reports that the Treasury will uprate Vehicle Excise Duty for cars, vans and motorcycles in line with the Retail Prices Index from April 1, 2027. The Budget text confirms it, but no exact figures have been published yet. For context, the standard rate for cars built after 2017 went from £195 to £200 earlier this year, after a similar £5 rise the year before.

Petrol, diesel and electric owners are all affected. A few pounds a year will not change anyone's choice of car, so we wouldn't treat this as the headline. Classic owners get a small gift: the historic exemption is expected to cover cars registered before 1987.

The rate isn't the risk; the pattern is

The more important story is what surrounds this uprating. The Independent has reported the end of the tax exemption for zero- and low-emission vehicles. Now GOV.UK sets out Electric Vehicle Excise Duty, a new mileage-based charge that will apply to battery EVs from April 1, 2028. Petrolprices.co.uk, a web page we can't date, puts it at 3p a mile for pure EVs and 1.5p for plug-in hybrids.

So in a few years an EV has gone from tax-free, to paying the standard VED, to being charged by the mile. Each step may be defensible on its own. Together they send a message: any assumption you make today about running costs has a shelf life.

We think that is the actual damage. Someone buying a new EV on a four- or five-year horizon is making a bet on rules that the government has shown it will rewrite. Someone buying petrol or diesel faces the same uncertainty from the other direction, because nobody knows how the balance will shift once pay-per-mile arrives and how the rest of the system will react.

It isn't only a car-tax problem. In the same Budget coverage, an RBC Brewin Dolphin director quoted by the Birmingham Mail said there have been more than 130 changes to personal finance rules announced in Budgets over the last 10 years. That was about savings, not cars, but it describes the same habit: constant tinkering that makes long-term planning harder than it should be.

What buyers should do

Our advice is to stop optimizing for the tax line and start building a margin for error.

• If you're weighing an EV, run your sums with a charge per mile included from 2028, not as a pleasant surprise but as a base case. If the numbers still work, the purchase is robust.
• If you're leaning petrol or diesel, don't assume today's tax treatment is permanent either. Rules rarely stay still for long.
• Treat the £5-ish annual VED movements as noise. The mileage charge is what could change your running costs.

The government's line is that it wants to help motorists who depend on their cars; Healey said "the van is the family car." Fair enough. But the best help for those households would be a promise that the rules won't change again for a while. That costs nothing, and we suspect it would do more for EV adoption than another tweak to the rate.

Our verdict: the April 2027 rise is a non-event, and eVED is the thing to watch. Until the Treasury commits to a settled framework, buy the car that suits your mileage, and assume the tax will move again.