Motorists across the UK are awaiting the next updates to rates on vehicle excise duty (VED), commonly known as road tax. It remains one of the essential annual expenses associated with car ownership, and can be a confusing topic to navigate with frequent adjustments to the VED car tax bands over the years. VED car tax rates on most new cars and used cars are set to rise in April 2024, but only in line with inflation based on the retail price index (RPI).
Currently, VED rates are tied to a car’s carbon dioxide emissions in the first year; thereafter your vehicle is charged at a flat rate. However, additional charges apply to vehicles that cost more than £40,000 when new, in years two through six of the car’s life. Only electric cars enjoy no VED at all.
But this favourable treatment for EVs is set to shift in the near future. The government has announced that electric cars’ VED exemption will end in 2025 and they will be subject to the next-lowest first-year rate. While this decision may stir controversy, it’s deemed a necessary move. VED generates over £7 billion annually for the Treasury and the continued exemption of EVs would significantly impact that revenue.
You can find out how much a particular car costs to tax using Parkers’ car tax checker.
Will new car buyers notice much of a difference?
At the low end of the banding, most new car buyers are unlikely to notice the bit extra they now have to pay in first-year VED. In most cases, the increases are only £5 to £30. At the top end of the scale, the increases get much bigger – the rate for cars that emit more than 255g/km of CO2 has increased by £360. Note that first-year VED charges are usually included in the monthly payment of car finance and leasing deals.
Cars costing more than £40,000 attract VED car tax surcharge
Vehicles that cost more than £40,000 when new (after options) incur an extra annual charge of £390 on top of the standard VED car tax rates, from their car’s second through sixth birthdays.
When the charge was introduced in 2017 it was largely only high-end, premium-brand cars that attracted it. However, recent inflation in new car prices means that many more mainstream models are liable for it, including top-spec Vauxhall Astras.
It’s even easier to get caught out when buying a used car. That’s because it’s often not clear what a car cost when it was new, especially as the £40,000 threshold takes the price of any optional extras into account. And most online car tax calculators don’t indicate if a particular car will incur the extra charge. Often the only way to find out is by starting the process of paying for road tax on the government’s website.
Classic car tax exemption
Vehicles built before 1 January of each calendar year become exempt from VED after 40 years. That means any car built during 1983 now doesn’t incur a charge; cars built in 1984 become exempt in 2024, and so on. Note that it isn’t an automatic process and owners need to apply for the exemption.
Year one VED rates for cars registered on or after 1 April 2017
This payment covers your car for the first 12 months of its life, from the date it’s first taxed.
CO2 (g/km) | Diesel cars (TC49) that meet RDE2 standard and petrol cars (TC48) | All other diesel cars (TC49) | Alternative fuel cars (TC59) |
0 | £0 | £0 | £0 |
1- 50 | £10 | £30 | £0 |
51 – 75 | £30 | £130 | £20 |
76 – 90 | £130 | £165 | £120 |
91 – 100 | £165 | £185 | £155 |
101 – 110 | £185 | £210 | £175 |
111 – 130 | £210 | £255 | £200 |
131 – 150 | £255 | £645 | £245 |
151 – 170 | £645 | £1,040 | £635 |
171 – 190 | £1,040 | £1,565 | £1,030 |
191 – 255 | £1,565 | £2,220 | £1,555 |
226 – 255 | £2,220 | £2,605 | £2,210 |
Over 255 | £2,605 | £2,605 | £2,595 |
Rates for the second year onwards
This payment comes into effect from year two of the car’s life – in other words, from the second time it’s taxed.
Alternative fuel vehicles include hybrids, bioethanol and liquid petroleum gas.
Fuel type | Single 12 month payment/by Direct Debit | Total of 12 monthly payments by Direct Debit | Single 6 month payment/by Direct Debit |
Petrol or diesel | £180/£180 | £189 | £99/£94.50 |
Electric | £0/N/A | N/A | £0/N/A |
Alternative | £170/£170 | £178.50 | £93.50/£89.25 |
Rates for cars with a list price of more than £40,000
Cars that cost more than £40,000 new (including options) incur an extra charge of £390 for five years, starting when the car is taxed for the second time. The full charges are shown below.
Fuel type | Single 12 month payment/by Direct Debit Diesel (RDE2)* and petrol | Total of 12 monthly payments by Direct Debit | Single 6 month payment/by Direct Debit |
Petrol or diesel | £570/£570 | £598.50 | £313.50/£299.25 |
Alternative | £560/£560 | £588 | £308/£294 |
A new car’s environmental credentials are made clear on an updated version of the government’s labelling system.
You can pay for VED online via the Government’s website.
Picture credit: Getty