New Vehicle Excise Duty (VED) car tax hikes confirmed for April 2027 will add inflationary increases to annual bills, hitting drivers already struggling with high fuel costs and rising ownership expenses. The rise, linked to the Retail Price Index (RPI), follows a year of soaring petrol and diesel prices.
Inflationary rise confirmed for April
Andy Burnham and John Healey will oversee the VED updates in April, with the Treasury already confirming the increases. The annual car tax rise is a routine adjustment that occurs each April, typically passing without much attention. However, this year's increase comes at a time when motorists are facing significant financial pressure.
In 2024, Rachel Reeves doubled first-year VED tax bills, with owners of brand new cars facing bills of over £5,000 per year. The 2027 rise is not as severe, being simply an inflationary increase linked to RPI.
Drivers already cutting back
Motorists have faced soaring fuel costs this year due to disruption in the Middle East, with diesel prices still hovering close to £2 per litre. Recent data from Tempcover, based on a survey of 2,000 UK adults, found that 40% of UK drivers have already reduced the number of vehicles on their driveway. One third (32%) said they no longer drive enough to justify owning more than one car as ownership costs bite.
Earlier this year, Turo's 2026 Car Ownership Index found that almost one quarter of British drivers (23%) will no longer own cars within the next five years. The survey of 2,009 UK adults found that one-third of those planning to give up driving blamed high petrol and diesel fuel costs.
Calls to reconsider the increase
Burnham has promised to focus on the cost of living, and there are calls for the Prime Minister to seriously reconsider any increase in motoring fees, even if inflationary. Experts have suggested that petrol and diesel fees are on the way down, but the question remains whether this will come fast enough with new tax hikes just months away.
