Car Tax Relief: Drivers on These Benefits and Pensions Could Avoid Paying

Major changes in car tax (vehicle excise duty) in 2025: Know what is the new system

Significant changes are going to be made to Vehicle Excise Duty (VED), commonly known as car tax, from April 2025. These changes will bring a tax increase for most drivers. However, individuals receiving certain benefits or pensions may get an exemption or reduction in car tax. This will give them some relief amid rising expenses.

Here is a complete information on how these changes mean for you and whether you may be eligible for exemptions or concessional rates.

Exemptions in Car Tax

Handicapped individuals may be interested in a full vehicle tax exemption if they receive certain mental/developmental, mobility, or other types of disability benefits. Now, an exemption of the tax is possible in the case the car is either embodying the needs of the disabled person himself only.

Such benefits include:

• Higher Mobility Component of Disability Living Allowance (DLA).
• Enhanced Mobility Component of Personal Independence Payment (PIP).
• Enhanced Mobility Component of Adult Disability Payment (ADP).
• Higher Mobility Component of Child Disability Payment.
• War Pensioners Mobility Supplement.
• Armed Forces Independence Payment.

How ​​to Apply (Claim Process)

To claim car tax exemption:

1. Choose the exemption option while applying for vehicle tax.
2. First-time vehicle registrations can be done at post offices.
3. When changing vehicles, an exemption should be renewed in favor of the new vehicle.
4. In the case of the vehicle being new and not yet registered in one’s name, fill out the V62 form and attach the ‘new owner’ slip from the logbook to the application.

Reduced Car Tax

People receiving certain benefits may be eligible for up to a 50% discount on car tax. These include:

• Standard Mobility Component of PIP.
• Standard Mobility Component of ADP.

Important:
Drivers receiving the lower rate mobility component of DLA are not eligible for this discount.

Motability Scheme

People receiving specific disability benefits can also benefit from the Motability Scheme. Under this scheme, you can lease a vehicle, scooter, or power wheelchair. It helps disabled people maintain their independence and mobility.

Upcoming Changes

Big changes are set to come to car tax rates for petrol, diesel, hybrid and electric vehicles from April 2025.

First year VED

The first year tax on new vehicles will now be 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

For example:

• Those driving a Ford Puma will now pay £440 in the first year instead of £220.
• Those buying a Range Rover will pay up to £5,490 in the first year instead of £2,745.

Extra tax on expensive vehicles

Owners of vehicles worth more than £40,000 will have to pay an extra £410 in tax each year for the first five years.

What does this mean for you?

• Owners of petrol, diesel and hybrid vehicles will face a massive hike.
• However, the tax rate for electric vehicles is still quite affordable. Their VED will be limited to just £10 in the first year.
• Those who are eligible for a car tax exemption or reduction should apply to take advantage of it as soon as possible.

Conclusion
The changes coming in 2025 could increase vehicle owners’ expenses. But if you meet the eligibility conditions, you could get relief. Apply in time to take advantage of a tax exemption or concession and reduce your expenses amid rising rates.

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