Car tax or Vehicle Excise Duty (VED) is a fee motorists pay to contribute towards transport infrastructure. Road tax rates are reviewed annually and the most recent Budget in March 2023 announced some new changes that come in from 1st April 2023. Here’s everything you need to know about the latest road tax rates.
Cars registered from 2017
From 2017 onwards, vehicles are assigned to tax bands based on carbon emissions. This band decides how much you pay for the first year of ownership. When a vehicle is brand new, the first year of road tax is structured slightly differently. The emissions band means more polluting vehicles are charged a higher rate to put their car on the road for the first time. This can be up to £2605 for the first year.
Once the first year has passed, cars priced at over £40,000 from new also pay an extra premium tax of £370 a year on top of the standard rate, this is up from £355. After the vehicle’s first six years on the road have passed, the standard rate of £180 will apply.
The same fixed rate is applied to diesel and petrol cars and is being increased from £165 a year to £180 from April 2023. Alternatively fueled vehicles like hybrids have traditionally seen cheaper road tax prices and were charged at £155, this is also likely to increase.
Cars registered from 2001 to 2017
This system is much more straightforward, road tax is calculated every year based on carbon emissions. Vehicles with larger engines in the top tax band pay £695 a year, whilst cars with emissions under 100g/km are free to tax. The highest rate in Band M was previously capped at £630.
Cars registered pre 2001
There’s just two categories for pre 2001 vehicles, engines over 1.5 litres and engines under 1.5 litres. The lower rate was £180 which is increasing to £200 for 2023 and the higher rate is shifting from £295 to £325. Cars that are more than 40 years old are exempt from road tax, as long as they are registered in the ‘historic tax class’.
Electric vehicle road tax
Electric cars are currently free to tax. The original list price is no longer taken into consideration and they fall into the lowest tax bracket because they have zero emissions. With the ban on all new petrol and diesel cars from 2030, electric cars will eventually start being taxed to make up for the tax deficit created by people switching to cleaner fuels. Hydrogen vehicles are also free to tax and if they become more popular and readily available in the UK will likely follow the same tax structure as EVs.
Changes to road tax from 2025
Whilst the current system is bound to change again before then, there’s already been some new guidance announced for road tax from 2025. Petrol and diesel cars registered between 2001 and 2017 in the lowest tax Band A will be shifted up to Band B, moving from £0 tax to £20 a year. Discounted rates for alternatively fueled vehicles such as hybrids will end and these vehicles will be charged the same rate as petrol and diesel cars.
For electric cars, 2025 will see fees introduced based on the age and original price of the vehicle. EVs registered before 2017 will see rates as low as £20 a year and those registered after 2017 will pay the same standard rate as petrol and diesel vehicles, currently £180. More expensive EVs over £40,000 when new will be charged a premium rate of £370 if the current fee structure remains the same.
Road tax tips
Even if your vehicle is exempt or free to tax, it must be registered for road tax. Remember, vehicles that would have cost over £40,000 when new and registered after 2017, will be charged road tax at a higher rate for the first six years.
Tax can be paid monthly, every six months or annually. Paying in instalments works out slightly more expensive over the year as interest is added on top of the yearly fee. Vehicle tax is also non-transferable, so any tax paid for a car for a car in advance will be refunded when the vehicle is sold and any car purchased must be taxed by its new owner.