Chancellor Rachel Reeves has confirmed new Vehicle Excise Duty (VED) bands that will affect nearly every petrol and diesel driver in the UK. Commonly known as car tax or road tax, VED is a mandatory fee for most motorists using public roads.
How Car Tax Is Calculated
The amount payable depends on the vehicle's first registration date, fuel type, and CO2 emissions. From 2026, most drivers will pay £200 annually, while those with cars originally costing over £40,000 face up to £640 per year.
Key Factors for VED Rates
- Date of first registration
- Original list price when new
- Fuel type (petrol, diesel, hybrid, or electric)
- Tailpipe CO2 emissions
Flat Rate for Newer Cars
All petrol, diesel, and electric cars registered on or after 1 April 2017 incur a standard flat fee. Vehicles with a list price exceeding £40,000 (or £50,000 for electric cars) attract an additional luxury car tax of £440 for five years, starting from the second year of registration. This brings the total to £640 annually.
First Year Rates
For brand-new cars, the first 12 months' tax is paid upfront based on CO2 emissions and fuel type. Older cars registered between 1 March 2001 and 31 March 2017 are taxed according to CO2 banding, with lower emissions meaning lower tax.
Insurance Requirement
To tax a vehicle, valid car insurance must be in place, either as a standard 12-month policy or temporary cover.
Changes for Electric Cars
From April 2026, electric cars no longer qualify for free road tax. Drivers of electric vehicles under one year old now pay the £200 annual flat rate, aligning them with petrol and diesel counterparts.
Summary of Rates
- Standard rate for petrol, diesel, and hybrid cars registered after 1 April 2017: £200 per year
- Luxury car tax surcharge for vehicles over £40,000 (or £50,000 electric): additional £440 per year for five years
- Older cars (pre-2017): rates vary by CO2 band
Drivers should check their specific vehicle details to determine the exact fee, as rates can differ based on registration year, fuel type, and emissions.
