Car tax bands explained — millions face £240 increase soon

Drivers are just getting used to new charges introduced in April 2026 but more are coming.

It can be difficult to keep up with car tax (officially known as vehicle excise duty or VED) rules, with the millions of cars on our roads falling into several different categories, meaning different costs for owners.

The amount of car tax you have to pay depends on several factors, including when your car was first registered, how much it cost, what kind of fuel it uses and how much CO2 it emits. It also matters whether your car is electric. Then there’s the fact that the amount you have to pay often changes on an annual basis, with new rules often introduced to deal with changing times and the introduction of new models.

Broadly speaking, most drivers in the UK pay £200 a year for car tax in 2026. However, this is far higher for people with cars which cost over £40,000, who have to pay an additional £440.

And there’s a big change coming in April 2028 which will affect the two million or so electric car drivers (that’s the current number of electric cars on our roads and there are likely to be more than this by April 2028).

UK Chancellor Rachel Reeves announced in her budget new rules which will see electric car (EV) drivers pay 3p per mile while plug-in hybrid drivers will pay 1.5p per mile. According to the Government, the average electric car driver driving 8,000 miles a year will pay an extra £240 a year alongside the existing vehicle excise duty rate.

However, there is better news for EV drivers: the expensive car tax supplement or “luxury car tax” will only apply to electric cars which cost more than £50,000, not £40,000 as it is for non-electric cars.

How much is my car tax in 2026?

The amount of VED you pay depends on many things but here are the key points:

• The standard tax rate for all petrol, diesel or hybrid cars registered after April 1, 2017 is £200.
• If your vehicle had a list price that exceeded £40,000 when first sold (or £50,000 if electric) you may also be liable for the ‘luxury car tax’ fee, which adds £440 to the annual VED cost, taking it to £640.
• If you drive an electric car in April 2028 you will pay an extra 3p per mile (or 1.5p for hybrid cars), meaning an additional £240 for cars that do 8,000 miles a year.
• If your car was registered before March 1, 2001, it depends on engine size and you either pay £230 a year or £375 a year. You can see the engine size details here.
• If your car was registered between March 2001 and April 2017 the amount of car tax you pay will be one of 13 bands between £20 and £790, depending on the CO2 emissions of the vehicle (the lower the CO2, the lower the tax). You can find every band on the UK Government website.

How is my car tax calculated?

Generally speaking, car tax bands are calculated according to the following main criteria:

• The date the car was first registered
• How much it cost when it was new
• The type of fuel it uses (petrol, diesel or electric)
• The level of CO2 it produces

What happens if I don’t pay car tax?

Unless you are exempt for paying car tax (see exemptions below) you have to pay it as soon as you take ownership. If you don’t you’ll first be served with a fine of £80 but this can increase to £2,500 or five times the amount of tax owed. You could also have your vehicle clamped.

Do I have to pay car tax?

The following vehicles are the only ones exempt from vehicle tax, although you’ll still need to apply for it:

• Vehicles used by a disabled person
• Disabled passenger vehicles
• Mobility scooters, powered wheelchairs and invalid carriages
• Historic vehicles built more than 40 years before 1 January of the current year
• Mowing machines
• Steam vehicles
• Vehicles used just for agriculture, horticulture and forestry.