Car Tax Exemptions 2025: With the Vehicle Excise Duty (VED)—commonly known as car tax—set to rise in April 2025, many UK drivers are bracing for increased costs. However, there’s good news for certain individuals: if you receive specific benefits or pensions, you may qualify for car tax exemptions or reductions, potentially saving you hundreds of pounds annually.
Understanding whether you’re eligible for an exemption and how to apply can make a significant difference in managing vehicle-related expenses. In this article, we’ll guide you through the eligibility criteria, application process, and the upcoming changes to car tax rates that could impact your wallet.
Quick Overview: Car Tax Exemptions and Reductions
Key Information | Details |
Who Qualifies? | Individuals receiving disability-related benefits and certain pensions |
Full Exemption | Available for one vehicle per eligible person |
Partial Reduction | 50% reduction for recipients of standard mobility rate benefits |
How to Apply | Online via the GOV.UK website or in-person at the Post Office |
April 2025 Changes | Increased VED rates for new petrol, diesel, hybrid, and electric vehicles |
Luxury Car Tax (Expensive Car Supplement) | £410 annually for vehicles over £40,000 (for the first 5 years) |
Electric Vehicle Tax | First-year VED of £10 starting April 2025 (previously £0) |
What Are Car Tax Exemptions?
Car tax exemptions allow certain individuals to avoid paying VED on their vehicles. This financial relief is particularly important given the upcoming tax increases in 2025. The exemption applies to one vehicle per eligible person, which must be used primarily for their personal needs. The vehicle can be registered in the claimant’s name or in the name of someone who uses it exclusively for the claimant’s benefit.
The UK government offers these exemptions to support individuals facing mobility challenges due to disability or those receiving specific pensions.
Who Qualifies for Car Tax Exemptions?
To qualify for a full car tax exemption, you must receive one of the following disability or mobility-related benefits:
- Higher Rate Mobility Component of Disability Living Allowance (DLA)
- Enhanced Rate Mobility Component of Personal Independence Payment (PIP)
- Enhanced Rate Mobility Component of Adult Disability Payment (ADP)
- Higher Rate Mobility Component of Child Disability Payment
- War Pensioners’ Mobility Supplement
- Armed Forces Independence Payment
Key Eligibility Rules:
- The exemption applies to one vehicle at a time.
- The vehicle must be used solely for the personal needs of the individual receiving the benefit.
- If the vehicle is used by someone else, it should only be for transporting the person who qualifies for the exemption.
How to Apply for Car Tax Exemption
Applying for car tax exemption is a straightforward process. Whether you’re applying for the first time or switching vehicles, here’s what you need to do:
Step-by-Step Application Process:
- Visit the GOV.UK Website:
- You can apply online through the GOV.UK vehicle tax portal.
- Select the Exemption Option:
- During the application, choose the exemption option that matches your eligibility based on the benefits you receive.
- Provide Proof of Eligibility:
- Submit relevant documentation, such as your benefit award letter or a certificate confirming your eligibility.
- Applying for a Vehicle for the First Time:
- If the vehicle is new or being registered for the first time, you’ll need to apply in person at a Post Office that handles vehicle tax services.
- Changing Vehicles:
- If you change cars, you must reapply for the exemption with the new vehicle details.
- New Vehicle Registration:
- For brand-new vehicles not yet registered in your name, complete a V62 form and include the green ‘new keeper’ slip from the vehicle’s logbook.
Car Tax Reductions: 50% Off for Certain Benefits
If you don’t qualify for a full exemption, you may still be eligible for a 50% reduction in your car tax. This partial discount applies to individuals receiving the standard rate of certain mobility-related benefits.
Benefits That Qualify for a 50% Car Tax Reduction:
- Standard Rate Mobility Component of Personal Independence Payment (PIP)
- Standard Rate Mobility Component of Adult Disability Payment (ADP)
Important Notes:
- The reduction applies to one vehicle only.
- You cannot claim both an exemption and a reduction for the same vehicle.
- Lower rate mobility component of DLA does not qualify for this reduction.
To apply for a car tax reduction, follow the same process as for an exemption—either online via GOV.UK or at the Post Office.
The Motability Scheme: An Alternative for Eligible Drivers
If you receive certain mobility-related benefits, you may also qualify for the Motability Scheme, which allows you to lease a car, scooter, or powered wheelchair using your benefits.
Key Features of the Motability Scheme:
- Leasing a Vehicle: You can lease a new car every three years, often with insurance, servicing, and maintenance included.
- Tax Benefits: Vehicles leased through the scheme are generally exempt from car tax automatically.
- Flexible Options: The scheme also covers scooters, powered wheelchairs, and accessible vehicles for individuals with specific mobility needs.
If you’re part of the Motability Scheme, the organization typically handles car tax on your behalf, saving you the hassle of applying separately.
Upcoming Changes to Car Tax in April 2025
Significant changes to Vehicle Excise Duty (VED) will come into effect in April 2025, affecting new petrol, diesel, hybrid, and electric vehicles. The adjustments will primarily impact the first-year car tax, which is now linked to a vehicle’s CO2 emissions.
New Car Tax Rates Based on CO2 Emissions:
CO2 Emissions (g/km) | 2024 Rate | 2025 Rate |
0 (Electric Vehicles) | £0 | £10 |
111–150 | £220 | £440 |
Over 255 | £2,745 | £5,490 |
What This Means for Drivers:
- Electric Vehicles: Previously exempt from first-year VED, electric cars will now incur a modest £10 charge starting in April 2025.
- Petrol and Diesel Vehicles: Significant increases are expected. For example:
- A Ford Puma owner will see their first-year tax double from £220 to £440.
- A Range Rover buyer could pay up to £5,490 in the first year, up from £2,745.
While electric vehicles remain the most affordable in terms of road tax, even they are no longer completely exempt.
Expensive Car Supplement: Additional Costs for Luxury Vehicles
In addition to the standard VED changes, there’s an Expensive Car Supplement for vehicles with a list price of over £40,000. This additional charge applies regardless of the vehicle’s fuel type—including electric cars.
Key Details of the Expensive Car Supplement:
- Extra Charge: £410 per year for the first five years after registration.
- Applicable to: New vehicles priced over £40,000.
- Electric Vehicles Included: Even high-end EVs like Tesla models may be subject to this supplement.
This tax is designed to target luxury vehicles, but with rising car prices, many mid-range models may also fall into this category.
How to Check Your Car Tax Status
If you’re unsure whether you qualify for an exemption or reduction, it’s easy to check your vehicle’s tax status online.
Steps to Check Your Car Tax Status:
- Visit the DVLA’s vehicle tax checker.
- Enter your vehicle registration number.
- View your current tax status, including whether any exemptions apply.
This tool is helpful for confirming your tax status, especially if you’ve recently changed vehicles or received new benefits.
Frequently Asked Questions (FAQs)
Who qualifies for car tax exemptions?
Individuals receiving specific mobility-related benefits, such as the Higher Rate Mobility Component of DLA or the Enhanced Rate of PIP, may qualify for a full exemption.
Can I claim an exemption for more than one vehicle?
No, exemptions apply to one vehicle at a time per eligible person. If you change vehicles, you’ll need to reapply.
What is the new car tax rate for electric vehicles?
Starting in April 2025, electric vehicles will be subject to a £10 first-year VED, compared to £0 previously.
What is the Expensive Car Supplement?
It’s an extra charge of £410 per year for vehicles with a list price over £40,000, applicable for the first five years after registration.
How do I apply for car tax exemption?
You can apply online via GOV.UK or at the Post Office for first-time applications.
Final Thoughts
With car tax increases on the horizon, understanding your eligibility for car tax exemptions or reductions is more important than ever. Whether you qualify for a full exemption, a partial reduction, or are eligible for the Motability Scheme, these benefits can provide meaningful financial relief.
As April 2025 approaches, take the time to review your eligibility, especially if you receive mobility-related benefits. Don’t miss out on potential savings—apply for your exemption or reduction today!
Do you have questions about car tax exemptions? Share your thoughts in the comments below—we’d love to hear from you!