Businesses that use commercial vehicles, including lorries, vans, and company cars, should be aware of several tax changes coming into effect in 2025. These changes cover areas like vehicle excise duty (VED), fuel duty, and the classification of double-cab trucks. This article summarizes the key updates that may impact your operational costs.
Vehicle Excise Duty Increases
All new vehicles registered are subject to VED, also known as road tax, during their first year. The rate depends on the vehicle’s CO2 emissions. From April 2025, VED rates are increasing across all vehicle types. The changes are significant, with a 100% increase for almost all emission bands. Below is a table highlighting the increases:
Paying Tax on Electric Vehicles
Previously, electric vehicles (EVs) were exempt from road tax. However, after April 1, 2025, all EV owners, including those with electric vans used as commercial vehicles, will have to pay the standard rate of road tax. For EVs purchased after April 2025, there will also be a first-year rate of £10, plus an additional ‘Expensive Car’ supplement of £410 if the vehicle’s list price exceeds £40,000.
Fuel Duty Freeze
Good news for businesses: the current fuel duty rate, set at 52.95 pence per litre, is remaining frozen until March 2026. While this provides some cost stability, businesses that rely on commercial vehicles for their operations should monitor any news regarding a potential end to the freeze.
New Classification for Double-Cab Trucks
Starting April 6, 2025, double-cab pick-up trucks with a payload of at least one metric tonne won’t be considered vans for benefit-in-kind (BIK) or capital allowance purposes. Instead, they’ll be classified as cars. This change could significantly increase BIK payments. These vehicles will then be taxed in a similar manner to some of the most polluting petrol and diesel cars, which often attract a rate exceeding 35%.
However, there is a way to avoid this increase. If you purchase a new double-cab pick-up truck before April 2025, it will retain its commercial vehicle classification until whichever date comes first: disposal, lease expiry, or April 6, 2029.
Vehicle Advisory Fuel Rates Increase
Effective from March 1, 2025, advisory fuel rates have been increased. This means that businesses utilizing company cars will likely see their costs rise. The per-mile cost has increased for petrol cars with engines up to 1,400cc (from 14p to 15p) and for diesel cars with engines up to 1,600cc.
Congestion Charges for EVs
As a final note, businesses operating in London should prepare for the introduction of the congestion charge for EVs. Starting in December 2025, electric vehicles and hydrogen fuel cell vehicles will also need to pay the £15 Congestion Charge. If your business depends on electric vans for work in London, factor this additional cost into your budgeting.
