What is Vehicle Excise Duty?

If you own a car then you will already be aware that you pay for something called Vehicle Excise Duty, or VED for short. That's the official name for what's more commonly known as both car tax and road tax – they're all different ways of saying the same thing. 

An earlier form of exise duty on vehicles was introduced in 1920, with the funds it raised specifically ring-fenced for the upkeep of the nation's road network, hence the road tax name. That stopped in 1937 when it poured into the government's general taxation pot instead. When VED was introduced in 1960, it was simple to understand with a flat rate applicable to all cars. Now it's far more complicated, with the amount you pay dependent upon a number of factors including:

• When the car was first registered

• What its CO2 exhaust emissions are

• What its price was when it was new

Aside from exemptions described below, you have to pay car tax – and even when those exemptions apply, you still have to notify the Driver and Vehicle Licensing Agency (mercifully better known as the DVLA) as to why no fee is due. 

VED costs are calculated at an annual rate, although it doesn't have to be paid yearly – you can choose to pay every six months, or with an additional small fee, eachmonth via Direct Debit.

Annual increases to the different rates of VED car tax usually take effect from 1 April each year and are based on the Retail Price Index (RPI). Any incremental VED payments due beyond that date are at the higher rate.

Significantly for drivers of zero- and low-emission cars, VED rates from 1 April 2025 ended their tax advantage of being far less expensive – if not free of charge – compared with models producing far higher levels of CO2.

In the autumn 2025 Budget, the Chancellor confirmed plans that from April 2028 an additional Electric Vehicle Exise Duty (eVED) would be levied upon drivers of electric and plug-in hybrid cars based on how far they are driven each year. For the first year of operation, electric car drivers will pay an extra 3p per mile, while PHEV owners will be charged 1.5p per mile.

VED rates for cars registered since 2017

Okay, this is where the complications begin due to the various factors which influence how much VED costs. In order to dissect VED into more easily managed chunks, we will initially explore the charges for cars registered from 1 April 2017 onwards as these are also applicable to brand new models.

As with its 2001-2017 predecessor, the VED rates continue to be based on cars' carbon dioxide emissions (CO2), but with greater degrees of granularity at the lower end of the emissions scale. 

What is the first year VED car tax rate?

When you buy a brand new car, the first year’s VED is included in its on-the-road (OTR) price. This can mean that you don’t notice it, but it's important to understand how much it costs as this is the only fee you will pay that is based purely on the car's CO2 emissions.

As of 1 April 2026 the amount charged for first year VED ranges from £10 for zero-emission cars – fully electric or hydrogen-powered, in other words – up to a whopping £5690 for the most polluting models emitting 255g/km or more of CO2. No brand new cars are exempt from a first year VED car tax charge.

What about VED car tax rates after the first year?

After that first year, a standard rate of annual VED car tax applies at a cost of £200 from 1 April 2026, regardless of how much CO2 the car produces.

Does the Expensive Car Supplement apply to my car?

Sometimes known as the 'luxury car tax', the Expensive Car Supplement is an additional level of taxation which can apply to new cars.

Cars producing 1g/km of CO2 or higher have a threshold of £40,000 before the Expensive Car Supplement comes into effect. Zero-emission cars have something of a tax break with the threshold increased to £50,000. In all instances, those are the transaction prices of the car, inclusive of any extra-cost optional extras fitted.

From the first to the fifth anniversaries of the car's initial registration, the Expensive Car Supplement will be paid in addition to the standard rate of VED car tax. As of 1 April 2026 this is set at £440, but it also increases in line with the RPI.

Do older low- and zero-emission cars also also attract VED car tax charges?

Yes, they do. Since 2025 hybrid and electric cars registered from 1 April 2017 and 31 March 2025, which previously attracted low or no VED charges, are also liable for the standard rate of car tax.

At the same time, older EVs registered between 1 March 2001 and 31 March 2017 remained in VED Band A but at a rate which is identical to Band B, currently £20 per year.

VED rates for cars registered between 2001 and 2017

If your car was registered between 1 March 2001 and 31 March 2017, its VED car tax rates are still determined by the vehicle's CO2 emissions, but also influenced by the fuel or energy used to power it.

Here the CO2 bandings apply to the standard rate of car tax rather than the flat fees applicable to newer models. Its CO2 emissions are taken from the car's V5C registration certificate, which you may know as the logbook. Those emissions levels place the car in one of 13 bands, labelled from A to M, with an increasing annual fee applicable to each.

Until 1 April 2025, Band A was tax-free but from that point it had the same annual VED rate applied to is as Band B.

Still, this could work out as being a lot cheaper when buying a used car. Otherwise identical cars that were registered either side of the 1 April 2017 VED methodology change bring with them very different car tax bills, which is often reflected in their asking prices.

Once again, you can pay annually, every six months or monthly via Direct Debit for a 5% surcharge.

VED rates for cars registered between 1986 and 2001

If your car is what might be deemed to be a modern classic, having been registered between 1 January 1986 and 28 February 2001, the VED car tax rate is based on engine capacity rather than CO2 emissions. 

It's a much simpler methodology as there are only two annual VED rates which apply, with the 2026-2027 rates being:

• 1549cc and below – £230

• 1550cc and above – £375

Those engine capacity figures are taken from what's recorded on the car's V5C registration document. If you're looking to buy an older car and want to know how much car tax you'll be paying each year, ensure you check the V5C before you buy it rather than simply assuming the 1.5 or 1500 badge it was marketed under is accurate.

VED rates for cars made before 1986

Cars manufacturered before 1 January 1986 qualify for the Historic Vehicle tax exemption – yes, you pay no VED car tax at all. It's applicable to all cars which are at least 40 years old and rolls forward to the next calendar year every 12 months.

Note that this doesn't happen automatically, meaning you have to notify the DVLA that you are applying for your car to be exempted due to its age. If the car's exact date of manufacture is unknown, providing it was registered before 8 January 1986 you can still apply for Historic Vehicle tax exemption.

Historic Vehicle status additionally means that providing the car has not been substantially changed from its original design structure and mechanical specification, there is no longer a requirement for it to be subjected to an annual MOT. 

Which other cars are exempt from VED car tax?

Aside from cars which meet the Historic Vehicle tax exemption requirements, other vehicle use categories mean their owners don't have to pay VED car tax on them:

• Cars used by a disabled person – You can find out if you’re eligible on the government website, claiming exemption if you meet the criteria listed. This exemption only applies to one car, so if you own more than one you will need still pay VED car tax on each.

• Cars used for agriculture, horticulture and forestry – As well as tractors and other vehicles specifically designed for farm work, limited-use cars that are used only for short journeys on public roads are also exempt from car tax. Those journeys are very restrictive in scope and must be only be used between tracts of land owned by the same person or business. If it's possible to access those land areas without using public roads, the exemption isn't granted.