850cc Small Car Sales Tax May Increase Soon - Learn More

Jawad

02 Jun 2025

146

850cc Small Car Sales Tax May Increase Soon - Learn More

The upcoming fiscal year 2025-26 budget is nearing release, and potential car buyers are closely watching for any changes that could affect Cars prices. A key area of concern this year is the sales tax on small cars 850cc, as indications suggest a significant 850cc car sales tax increase could be on the horizon.

Every year, the government revises tax policies for the automobile sector, impacting sales tax, withholding tax, regulatory duty, and other fees. These adjustments often result in either relief or added costs for consumers. For 2025, the focus appears to be on revising the 850cc vehicle tax update, which could bring substantial changes for buyers of budget-friendly small cars.

Proposed Sales Tax Changes for Small Cars

Currently, vehicles with engine sizes up to 850cc benefit from a reduced sales tax rate of 12.5%. However, the latest proposal aims to raise this to the standard rate of 18%, marking a clear small car tax rate increase. This is part of a government effort to unify tax rates and eliminate exemptions that reduce overall revenue.

If the proposal to amend the Sales Tax Act 1990’s 8th Schedule goes through, it will result in a direct hike in the 850cc car price sales tax, causing an immediate increase in prices for small car buyers. This small car sales tax rise could make owning an affordable car more challenging for average consumers who rely on these vehicles.

Bigger Cars Also Face Tax Hikes

While the spotlight is on smaller cars, larger vehicles with engine sizes exceeding 1,300cc are not exempt from tax changes. Reports indicate the Federal Board of Revenue (FBR) is considering raising the withholding tax on these bigger cars, which is currently calculated based on engine capacity. This proposed 850cc car tax hike 2025 will align with broader tax reforms aimed at increasing government revenue.

Here’s the existing withholding tax scale for larger vehicles, which may see increments:

>> 2% for 1,300cc–1,600cc

>> 3% for 1,601cc–1,800cc

>> 5% for 1,801cc–2,000cc

>> 7% for 2,001cc–2,500cc

>> 9% for 2,501cc–3,000cc

>> 12% for above 3,000cc

These rates are likely to rise, affecting ownership costs for mid-sized and large vehicles.

What Does This Mean for Car Buyers?

The impact of sales tax increase on 850cc cars will be felt primarily by buyers looking for affordable transportation. With the potential increase in sales tax on small cars 850cc, it may be wise for consumers to finalize their purchases before the budget announcement to avoid paying higher prices.

For those considering larger vehicles, keeping an eye on withholding tax adjustments is important, as the 850cc car buyers sales tax changes could signal similar trends in higher tax burdens across various engine sizes.

Possible Relief Through Used Car Imports

In an effort to soften the blow of rising taxes, the government is reportedly considering relaxing import restrictions on used cars up to five years old. This move could provide a cheaper alternative for buyers affected by the small car sales tax rise, offering more options in the market despite the price increases on new vehicles.

The upcoming fiscal budget indicates a clear direction toward tax reforms that include an 850cc car sales tax increase and broader sales tax changes for small cars. Buyers should stay informed and consider their options carefully. Acting before the 850cc car tax hike 2025 could save money, especially for those looking at small cars.

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