As a taxi driver, you’re already juggling fuel prices, maintenance costs, and insurance premiums. Now, with the government set to increase Vehicle Excise Duty (VED) for older and higher-emission vehicles starting April 2025, there’s another potential strain on your budget to consider.

At SEP Insurance, we work closely with taxi drivers, and these upcoming changes have sparked plenty of conversation. Let’s break down what’s happening and how it could affect your business….

The facts about the hikes

The 2025 tax changes aim to push drivers towards cleaner vehicles by significantly increasing rates for older petrol and diesel models.

Cars registered between 1984 and 2001 will be hit hard by the tax overhaul as they fall under a different tax system. Experts say drivers in the lower power bracket will pay £220 in 2025/26, a hike of £10.

Even those with slightly lower emissions face substantial hikes, with rates for vehicles emitting 76-90g/km set to double as well​.

Zero-emission vehicles, on the other hand, will enjoy minimal fees, with a first-year rate of just £10 continuing until 2029. While this incentivises a transition to electric cars, it creates immediate challenges for drivers relying on older, emission-heavy vehicles.

What this means for taxi drivers

Many taxi drivers operate older vehicles because they’re more affordable upfront. However, these hikes could mean an extra financial burden, money that might otherwise go towards maintaining your car or paying insurance premiums.

For drivers with larger fleets or those in areas with high environmental regulation (such as Clean Air Zones), the pressure to switch to compliant vehicles could become unavoidable. The upfront cost of replacing older cars with hybrids or EVs is significant, especially with limited second-hand options for EVs on the market.

But it’s not all doom and gloom. These changes could also encourage innovation in the industry, with fleet owners and individual drivers finding ways to adapt—whether by adopting greener vehicles or rethinking operational costs.

How you can prepare

• Assess how much these hikes could cost you annually. This will help you decide whether it’s time to upgrade your vehicle.
•   Make the most of incentives. The government continues to support EV adoption through      reduced tax rates and grants for charging infrastructure. If an upgrade is on the cards, these benefits could offset the initial cost.

• Consider insurance adjustments. Insuring an electric or hybrid taxi could come with its own savings. Our team at SEP Insurance can help you explore tailored policies for greener vehicles.
• Advocate for change. Local taxi unions and driver groups may push for support schemes to ease the transition, such as subsidies for fleet electrification.

A balancing act

For taxi drivers, the 2025 vehicle tax changes underline the ongoing challenge of balancing affordability and sustainability. While the move towards greener vehicles is essential for the environment, the immediate financial impact can’t be ignored.

At SEP Insurance, we’re here to help you navigate these changes. Whether it’s finding the right insurance for a new EV or ensuring your current policy meets your needs, we’ve got your back. We can help make the transition as smooth as possible.

Get in touch for your free quote.