New car sales fell by a tenth in April as DOUBLED car tax rates hit buyers

By FREDA LEWIS-STEMPEL

New car sales took a tumble in April, as buyers avoided being stung by high new car tax rates introduced by Chancellor Rachel Reeves at the start of the month.

The market declined 10.4 per cent, with just over 120,000 new cars registered in April, the latest industry figures from the Society of Motor Manufacturers and Traders (SMMT) show.

It is a sixth month out of the last seven in which annual sales have fallen, which the SMMT says reflects a 'fragile economic backdrop' and 'weakened consumer confidence'.

There were 13,943 fewer cars registered in April 2025 compared with the year before. 

Notably, sales are down by a quarter (25.3 per cent) on pre-pandemic April 2019 registrations, the trade body confirmed. 

Demand for new cars took a major hit because 1 April saw the introduction of doubled first-year 'showroom tax' Vehicle Excise Duty (VED) rates - the biggest shake-up to car tax in almost a decade.

The Chancellor's tax raid on motorists sees EV owners having to VED for the first time ever - while buyers of brand new electric cars costing over £40,000 also incur a £425-a-year expensive car supplement (ECS) levied over a five-year period. 

New car sales fell 10.4% in April new figures from the SMMT show. This is due to a number of factors but mainly the high, new VED rates from 1 April 

A total of 120,331 new cars were registered last month as drivers appeared to shy away from showrooms due to the hike in taxation.

However, EV registrations rose 8.1 per cent in spite of the tax sting also impacting new and existing battery-powered vehicles. 

Despite this increase in EV demand against a backdrop of falling car sales, battery electric vehicles still only accounted for 20.4 per cent of all registrations last month.

This is significantly below the Zero Emission Vehicle (ZEV) Mandate requirement of a 28 per cent share, though Keir Starmer's watered-down targets means hybrid sales are now inclusive to meet the annual threshold.

Mike Hawes, SMMT chief executive, said April’s performance was 'disappointing but expected after March’s surge'. 

April is traditionally a quieter month following the busy March plate change period.

'Another month of growth for electric vehicle registrations is good news, however, even if demand remains well below ambition,' he continued.

'Recent government adjustments to flexibilities and compliance within the ZEV Mandate are welcome and an important first step in relieving some of the pressure on the market and manufacturers.'

Sector bosses also pointed to the late timing of Easter and fewer working days in which showrooms could sell new models to customers. 

'It is important to note that this dip coincided with the Easter bank holiday, which may have impacted activity during the month', said Sue Robinson, chief executive of the National Franchised Dealers Association, which represents franchised car and commercial vehicle retailers in the UK.

Market outlooks were revised with full year 2025 new car registrations targeted at 1.964 million units, keeping 2026 expectations below the two million mark for what would be the seventh successive year. 

In April 120,331 new cars were registered. Although this is an overall drop, battery electric car registrations rose 8.1%

Registrations fell across all sales types, with private, fleet and business demand down 7.9 per cent, 11.9 per cent and 10.9 per cent respectively. Fleets drove sales, being responsible for six in 10 registrations, the data shows.

In terms of fuel type, demand for conventional 'self-charging' hybrids fell 2.9 per cent, with petrol and diesel registrations down 22 per cent and 26.2 per cent respectively. 

On the flip side, registrations of plug-in hybrids rose: PHEV demand grew 34.1 per cent.

Over the course of the first five months of the year, the new car market is up 3.1 per cent on the same period in 2024.

EV registrations are ahead by 35.2 per cent, making them the second most popular powertrain after petrols. 

In April 120,331 new cars were registered. Although this is an overall drop, battery electric car registrations rose 8.1% For 2025 as a whole, motor sales are 3.1% up

All drivers are set to face high VED outgoing in the next 12 months due to changes ushered in by Labour. 

This is Money has detailed all the VED hikes based on the age of the car you drive, so you can see how much you will pay compared to last year. 

For new car buyers, the increase in costs is significant.

This is because the Chancellor has doubled first-year 'showroom tax' for all new petrol, diesel and hybrid models - something experts labelled a 'shove, not a nudge' towards EV uptake.

While those buying relatively economical cars with CO2 emissions as low as 76g/km will be stung an extra £135 (£270 in total) in the first year, the financial ramifications for buyers of hulking SUVs and supercars will be far more severe. 

Those purchasing the most polluting new cars fork out an eye-watering £5,490 in VED just for the first year.

New electric cars will cost just £10 to tax in the first year - and this will be the case until 2029-30 under Labour rules.

To also encourage motorists to buy the greenest hybrid cars, new models emitting between 1 and 50g/km CO2 (which is achieved only by plug-in hybrids) will be subject to a £110 first-year VED rate.

For higher-emitting plug-in hybrids putting out between 51 and 75g/km CO2, the showroom tax will be £130.

Buyers of 'premium' EVs face massive tax costs

From 1 April 2025, owners of zero emission vehicles had to start paying car tax the same way as drivers of petrol and diesel cars.

Buyers of new EVs will pay £10 for first-year showroom VED.

However, if the EV purchased costs over £40,000, it is deemed a premium model and will be subject to the 'expensive car supplement' (ECS) that was previously only levied on new petrols and diesels. This is an additional £425 for the first five years on top of the standard rate.

This 'Tesla tax' - as it has been dubbed by industry insiders due to the US car brand only selling premium-priced models - will see owners wrangled into paying £425-a-year on top of the standard rate of tax for five years. 

From the second year after registration, EVs costing less than £40k new will be subject to the same standard rate of VED - £195 - as internal combustion engine cars.

However, owners of EVs bought for more than £40,000 from April 2025 will see their annual tax outlay hit £620-a-year until 2030. 

Owners of existing EVs also won't escape the tax hikes.

Any electric car registered between 1 April 2017 and 31 March 2025 is subject to the full standard VED rate of £195.

Those EVs on the road that were registered between March 2001 and April 2017  - early adopter vehicles - will be subject to the lowest VED band costing £20, but only a small volume of drivers bought EVs during these years and are impacted.