Some know it as road tax, while others rightly call it VED (Vehicle Excise Duty) but car tax is something that all drivers are affected by in some shape or form. Since its inception in the early 20th century, car tax has been collected by the Government, though this process has evolved over time as our automotive technology has also developed.
Let’s get into the details of what car tax is and why it is we pay it…
| What is Car Tax? | What does Car Tax pay for? |
| What are the Car Tax changes from 2026? | How much is Car Tax? |
| How much is Electric Car Tax? | How do I tax a car? |
| Where did the tax disc go? | Car Tax FAQs |
What is car tax?
Car tax is more officially known as VED and was born out of a need to collect funds to look after our roads, as cars became more and more prevalent.
Starting out as a direct way to cover the cost of both the maintenance and creation of our road systems, car tax exists today as a cost to motorists – in essence – as a tax on your vehicle.
The term ‘Vehicle Excise Duty’ was established in 1936, and the system has evolved ever since, with the cost of car tax increasingly becoming a reflection of how efficient a vehicle is. As a result, regulations such as EU directives to have manufacturers build their cars with engines that meet certain standards have had a notable effect on car tax.
Vehicle Excise Duty, being based on emissions, has been around since 2001, and the calculations around it have moved with such changes in technology. For instance, in 2001, average new car emissions were 178g/km of CO2, but this figure has since dropped to circa 125g/km.
A balancing act of ensuring enough money is being brought into the government coffers, and the right kinds of cars paying certain amounts, is always at the forefront of what car tax is about, with updates happening every few years as a result.
Car tax bands are also in place to reflect the effectiveness of creating strong signposting for environmental standards. However, electric cars used to be exempt, but this is no longer the case.
What does car tax pay for?
While many might believe the opposite, VED doesn’t go directly to local councils – or even the Department of Transport – in fact, it goes into the same pot of cash as your council tax and other such contributions.
So, while the DoT doesn’t get its funding directly from the public, the Government will allocate a yearly budget to the department for it to spend as required.
Effectively, car tax is not a road tax, but more a tax on the vehicle itself. Whenever you see roads getting repaired, it is not car tax paying for this – the cost allowance for this maintenance is worked out with the rest of the budget for the local council as a whole.
When it comes to the enhancement or creation of major road systems, meanwhile, the budget for this work comes out of the total budget handed to the Department of Transport by the Government.
What are the car tax changes from 2026?
The rules still depend heavily on your vehicle’s emissions and when it was first registered.
- The Standard Rate: For petrol and diesel cars registered on or after April 1, 2017, the flat annual rate has increased from £195 to £200.
- The Hybrid Discount: The £10 reduction for hybrids and alternative fuel vehicles was completely removed by the government in 2025. Hybrids now pay the same standard £200 flat rate as standard petrol and diesel cars.
- Older Cars (Pre-2017): If your car was registered before April 2017, the older systems based on engine size or CO₂ bands still apply, though those rates have also crept up slightly due to inflation.
The “Luxury Car Tax” (Expensive Car Supplement)
If your vehicle had an original list price of over £40,000 when new, you must pay a yearly supplement for 5 years, starting from the second year of registration.
- For Petrol, Diesel, and Hybrids: The threshold remains £40,000. The annual supplement has increased to £440 (up from £425), meaning you’ll pay a total of £640 a year.
- The 2026 EV Bonus: A major change starting April 1, 2026, is that the government has increased this threshold to £50,000 specifically for fully electric vehicles. This applies retrospectively to EVs registered from April 2025 onward. If your electric car costs between £40,000 and £50,000, you are now exempt from paying this heavy supplement!
How much is electric car tax?
Electric vehicles are no longer exempt from VED, following the rules that brought them into the standard system in 2025. Here is the layout for 2026:
- For EVs registered from April 1, 2025: The first-year “showroom tax” rate remains frozen at a highly discounted £10 (and is set to stay that way until 2029). After that first year, they will roll onto the standard £200 rate.
- For EVs registered between April 1, 2017, and March 31, 2025: You will pay the standard flat road tax rate of £200 per year.
First-Year Rates for Hybrids and Low-Emission Cars (2026)
If you are buying a brand-new car in the 2026/2027 tax year, the first-year emissions-based rates have increased slightly:
- Plug-in hybrids (1–50g/km CO₂): The first-year tax is now £115 (up from £110).
- Low-emission vehicles (51–75g/km CO₂): The first-year tax is now £135 (up from £130).
From there, rates scale up quite aggressively based on emissions, reaching a maximum of £5,690 for the absolute highest polluters (over 255g/km) in their first year
How do I tax a car?
When buying a brand new car, and it is being registered as part of the process, car tax will be taken care of by the dealer you’re purchasing your car from. If buying a second-hand car, you will be able to arrange car tax on your own, although the dealer may be able to help you sort this as part of the buying process.
To tax a car you already own, you will get a reminder from the DVLA (a V11 reminder letter), which will give you guidance on how best to tax your vehicle, and the easiest and quickest way will be to arrange your car tax online via the Government portal. They will offer you a choice of paying every month, every 6 months, or every year using Debit, Credit Card, or Direct Debit. You can also pay at your local Post Office.
The process is straightforward, and you just need the reference number from one of the following:
- a recent reminder (V11) from the DVLA
- Your vehicle log book (V5C) – it must be in your name
If you’ve just bought a car privately, then you’ll also be able to use the reference from the green ‘new keeper’ slip that is from the car’s log book.
Where did the tax disc go?
Anyone who was driving before 2014 may very well remember the physical tax disc that went in the corner of our windscreens. Due to the modernisation of monitoring car tax, such needs became obsolete, and so the tax disc quickly became a thing of the past.
Car Tax FAQs
When is my car tax due?
You can find this out on the Government’s online portal – you just need your vehicle’s registration to get started.
Can you tax a car without an MOT?
You will require a valid MOT certificate if you wish to get your car taxed, as driving without an MOT is illegal.
How to tax a car without a V5C document?
You can also use your reference number from a V11 reminder letter that the DVLA will send you when it’s time to renew your car tax. If you are trying to tax a vehicle you’ve just bought, but have not received the updated V5C document, then you can use the reference from the ‘new keeper’ slip.
Can the police seize my car for having no tax?
The DVLA has devolved powers to the police and local authorities that allow them to seize untaxed vehicles, and take them to a compound where you’ll need to pay a fee to have it released, as well as provide evidence that you have subsequently taxed your vehicle.
Which cars are exempt from car tax?
Vehicles used by those who are disabled are able to claim disability exemption if they meet certain criteria. Meanwhile, vehicles that are used by organisations providing transport for disabled people are also exempt.
Historic vehicles over 40 years old do not have to pay car tax.
Electric vehicles are no longer exempt.
When was road tax abolished?
When Vehicle Excise Duty was brought in in 1936, ‘road tax’ was abolished, as the tax collection from motorists no longer directly paid for the cost of road maintenance.
Do buses pay tax?
Buses do pay VED, but at a discounted rate as they provide a public service.
Why don’t cyclists pay tax?
As previously explored, car tax isn’t a tax to use the roads or pay towards their maintenance – car tax is a tax on the vehicle. As such, cyclists do not need to pay tax as no equivalent taxation applies to bicycles.
Learn about how electric and hybrid cars work and how they help the environment with our comprehensive guide.
Discover emission-free driving with a new electric car through one of our various manufacturers. Plus, you can find some great deals on used electric cars which are more widely becoming available on the second-hand market.
