The extraordinary 'hidden' costs that could hit your fleet in 2025

Fleet managers should be aware of the high-cost of taking new high-value and polluting vehicles into their businesses from 2025.

From April, 59 cars from 24 manufacturers, including everyday brands like Toyota and Ford, and premium ones such as BMW and Mercedes, will face significant increases in Vehicle Excise Duty (VED). This change, announced in the Autumn Budget by the Government, will see first-year VED rates rise dramatically for petrol, diesel and hybrid vehicles.

The increases are charged on a sliding scale, with the steepest hikes affecting vehicles emitting over 255g/km of CO2.
Owners of such high-emission models, including luxury brands like BMW, Mercedes and Audi, will see their first-year tax fees double, with increases of up to £2745, but mid-market brands such as Ford and Toyota will also be impacted. For example, a new Ford Puma’s first-year VED will jump from £220 to £440, while a Range Rover’s tax could soar to £5490, up from £2745.

Chancellor Rachel Reeves explained the aim is to incentivise electric vehicle (EV) adoption by widening the tax gap between high-emission vehicles and EVs.

While EVs currently enjoy VED exemption, they will incur a nominal £10 charge for the first year from April 2025.

The Budget also confirmed continued support for EVs, with perks in the company car tax regime and a one-year extension of 100% First Year Allowances for zero-emission cars and EV charge points. Reeves highlighted that these changes encourage the shift towards cleaner vehicles, ensuring higher taxes for more polluting cars while keeping incentives for EV adoption alive.

This update is expected to impact buyers of new vehicles, particularly those in the premium and high-emission categories.

How to beat the rises

Ian Richardson, MD of FleetWise owner, 360 Media Group, has advice for fleets who are in danger of being caught out by the unforeseen tax rises: "Half of UK fleets have no formal fleet policy or there's a lack of structure around emissions, so they're leaving themselves wide open to incurring significant and unexpected VED costs.
"One reason is that 54% of fleets allow their drivers to trade-up – to spend their own money to lease a better vehicle than the ones in their banding. This number has doubled in recent years and it means that, while the driver may contribute to the leasing fees, the company is left to cover any additional VED payments. In the case of senior staff and executives, this can often be thousands of pounds per vehicle. 
"As 1/3 of fleets haven't increased their monthly rental bandings in the last two years, more and more drivers have opted to fund the extra leasing costs themselves, to drive their preferred car. 
"These changes mean that it's more important than ever for fleets to introduce a formal company car policy, which may be based on value, emissions or a combination of the two.
"By capping CO2 emissions, the fleet manager is not only limiting the company's exposure to extreme VED rate rises, they can also contribute to their fleet's sustainability targets."

The FleetWise Fleet Policy and Green Fleet Policy tools are now available to download for free. Click here to download them.

The list of 59 new models emitting over 255g/km of CO2 that could costs fleets dearly: