Car tax, officially known as Vehicle Excise Duty (VED), is a mandatory annual payment for using or keeping a vehicle on UK public roads. Whether you drive a petrol hatchback, a diesel van, an electric company car, or a classic vehicle, understanding your tax obligations is essential for legal compliance and effective fleet cost management.
This comprehensive guide covers everything you need to know about UK car tax in 2026, including current VED rates, company car Benefit-in-Kind (BIK) tax, car tax exemptions, and practical guidance for both individual drivers and fleet operators.
Quick Answer: UK car tax (Vehicle Excise Duty) costs £200 per year for most cars registered after April 2017. First-year rates range from £10 for zero-emission vehicles to £5,690 for high-emission cars. Electric vehicles now pay VED from April 2025, and company car tax (BIK) for EVs is 3% in 2025/26, rising to 4% in 2026/27.
What is car tax (VED)?
Vehicle Excise Duty (VED), commonly called car tax, road tax, or vehicle tax, is an annual tax levied on vehicles used or kept on public roads in the UK. The tax is collected by the Driver and Vehicle Licensing Agency (DVLA) and contributes to general government revenue, not specifically to road maintenance, despite the historic term 'road tax'.
Key facts about VED:
VED generated approximately £9.1 billion in 2025-26.
Tax rates are adjusted annually in line with the Retail Price Index (RPI).
Rates depend on registration date, CO2 emissions, fuel type, and list price.
Tax can be paid annually, six-monthly, or monthly via Direct Debit.
How much is UK car tax in 2026?
Car tax rates depend on when your vehicle was first registered. The system operates differently for cars registered before and after 1 April 2017.
Cars registered on or after 1 April 2017
For vehicles registered from April 2017 onwards, VED is calculated in two parts:
First-year rate (showroom tax): Based on CO2 emissions, paid when the vehicle is first registered. Ranges from £10 for zero-emission vehicles to £5,690 for vehicles emitting over 255g/km of CO2.
Standard rate (year two onwards): A flat rate of £200 per year from April 2026 (up from £195 in 2025/26), regardless of emissions.
First-year VED rates 2026/27:
CO2 emissions (g/km) | Petrol/Diesel | Alternative fuel |
0 | £10 | £10 |
1-50 | £110 | £110 |
51-75 | £130 | £130 |
76-90 | £190 | £190 |
91-100 | £210 | £210 |
101-110 | £240 | £240 |
111-130 | £290 | £290 |
131-150 | £590 | £590 |
151-170 | £1,090 | £1,090 |
171-190 | £1,690 | £1,690 |
191-225 | £2,790 | £2,790 |
226-255 | £4,090 | £4,090 |
Over 255 | £5,690 | £5,690 |
Expensive car supplement (luxury car tax)
Vehicles with a list price exceeding £40,000 when new (including optional extras but excluding first registration fee) pay an additional £425 per year on top of the standard rate. This supplement applies for five years, starting from the second year of registration.
Important change for 2026: From 1 April 2026, the expensive car threshold increases to £50,000 for zero-emission vehicles only. This means electric cars priced between £40,000 and £50,000 registered from April 2025 onward will not be subject to the supplement. Petrol, diesel, and hybrid vehicles retain the £40,000 threshold.
Total annual VED with supplement: £200 (standard) + £425 (supplement) = £625 per year
Cars registered before 1 April 2017
Vehicles registered between 1 March 2001 and 31 March 2017 pay VED based on CO2 emissions bands, with rates varying from £0 for the lowest emissions to £735 for the highest. These older vehicles are not subject to the expensive car supplement.
Electric vehicle car tax
From 1 April 2025, electric vehicles will no longer be exempt from paying VED. This marks a significant change after years of zero road tax for EVs.
Current EV car tax rates:
New EVs (registered from April 2025): £10 first-year rate, then £200 standard rate.
Existing EVs (registered April 2017 - March 2025): £195 standard rate (rising to £200 from April 2026).
Older EVs (registered before April 2017): £20 per year.
Pay-per-mile eVED (from 2028)
The government has announced a new Electric Vehicle Excise Duty (eVED) system, effective from April 2028. Electric and plug-in hybrid vehicle owners will pay a per-mile charge of 3p per mile, in addition to standard VED rates.
According to government estimates, the average EV driver (8,000 miles annually) will pay approximately £240 per year under the eVED system. The government has confirmed that no tracking devices will be required, and mileage will likely be verified at MOT test centres.
Company car tax (Benefit-in-Kind)
If your employer provides a company car for personal use, you pay Benefit-in-Kind (BIK) tax based on the car's value and CO2 emissions. Company car tax is separate from VED and is deducted from your salary via PAYE.
How to calculate company car tax
Company car tax is calculated using three factors:
P11D value: The car's list price including VAT, delivery charges, and optional extras (excluding registration fee and road tax).
BIK percentage rate: Set by HMRC based on CO2 emissions (ranging from 3% to 37%).
Your income tax rate: 20%, 40%, or 4,5% depending on your tax bracket.
Tax Calculation Formula: P11D value × BIK percentage × income tax rate = your annual tax payable.
BIK rates 2025/26 to 2029/30:
Vehicle type | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 2029/30 |
Electric (0g/km) | 3% | 4% | 5% | 7% | 9% |
1-50g/km (130+ mi range) | 3% | 4% | 5% | 7% | 9% |
1-50g/km (70-129 mi) | 6% | 7% | 8% | 10% | 12% |
1-50g/km (40-69 mi) | 9% | 10% | 11% | 13% | 15% |
1-50g/km (under 40 mi) | 14% | 15% | 16% | 18% | 19% |
51-54g/km | 15% | 16% | 17% | 19% | 20% |
Maximum rate (170g/km+) | 37% | 37% | 37% | 38% | 39% |
Company car tax calculation examples
Tax Example 1: Electric company car
P11D value: £40,000 | BIK rate (2025/26): 3% | Tax bracket: 40%
Annual tax: £40,000 × 0.03 × 0.40 = £480 per year (£40 per month).
Tax Example 2: Petrol company car (100g/km CO2)
P11D value: £40,000 | BIK rate (2025/26): 25% | Tax bracket: 40%
Annual tax: £40,000 × 0.25 × 0.40 = £4,000 per year (£333 per month).
Key insight: An electric company car incurs 88% less BIK than an equivalent petrol vehicle, making EVs highly attractive to company car drivers.
Company car fuel benefit
If your employer provides fuel for private mileage, you pay additional tax on this benefit. For 2025/26, the fuel benefit multiplier is £28,200.
Tax Calculation: £28,200 × BIK percentage × income tax rate = annual fuel benefit tax
For a 40% taxpayer with a 25% BIK car: £28,200 × 0.25 × 0.40 = £2,820 per year. In most cases, paying for your own private fuel is more economical than accepting the fuel benefit.
Who is exempt from paying UK car tax?
Certain vehicles and individuals qualify for a VED exemption, so they don't have to pay car tax:
Historic vehicles (40-year rule)
Vehicles manufactured more than 40 years ago qualify for a VED exemption under the historic vehicle classification.
From 1 April 2026, cars built before 1 January 1986 are exempt.
Requirements:
Vehicle must be registered in the 'historic' tax class with DVLA.
Cannot be used for hire or commercial purposes.
Must not have been substantially modified.
An annual renewal is still required (at £0 cost).
Historic vehicles may also be exempt from MOT testing, provided they haven't undergone substantial changes in the last 30 years.
Disability exemption
You may be exempt from VED if you receive:
Higher rate mobility component of Disability Living Allowance (DLA).
Enhanced rate mobility component of Personal Independence Payment (PIP).
War Pensioners' Mobility Supplement.
Armed Forces Independence Payment.
The exemption applies to one vehicle registered in the disabled person's name or in the name of their nominated driver.
Other exemptions
SORN vehicles: Vehicles declared off-road with a Statutory Off Road Notification.
Agricultural vehicles: Tractors and certain off-road agricultural machinery.
Limited use vehicles: Vehicles travelling less than 1.5km on public roads between private land.
How to tax your vehicle
You can tax your vehicle through several methods:
Taxing your vehicle online (recommended)
Visit gov.uk/vehicle-tax with your V5C registration document reference number or the 11-digit reference from your V11 reminder letter. Payment can be made by debit card, credit card, or Direct Debit.
Taxing your car at the Post Office
Take your V5C, valid MOT (if applicable), and valid insurance to a Post Office branch that is able to handle vehicle tax.
Taxing your car by phone
Call the DVLA with your V5C or V11 reference number.
Car tax payment options: Pay annually (no surcharge), six-monthly (5% surcharge), or monthly via Direct Debit (5% surcharge spread across payments).
What is a SORN?
A Statutory Off Road Notification (SORN) declares that your vehicle is not being used or kept on public roads. Once declared, a SORN remains valid indefinitely until you tax the vehicle again or sell it.
Key SORN rules:
You don't pay VED while the vehicle is SORN.
The vehicle must be kept on private land (not public roads).
You'll receive a refund for any full months of unused tax.
You can declare SORN online at gov.uk/sorn.
Car tax guidance for fleet managers
For businesses managing vehicle fleets, understanding the full taxation landscape is essential for cost control and compliance.
Total cost of ownership considerations
EV transition planning: Electric vehicles offer substantial BIK savings (up to 88% vs petrol/diesel), but VED is now payable. Factor in the upcoming eVED from 2028.
List price thresholds: Consider vehicles priced just below £40,000 (or £50,000 for EVs from 2026) to avoid the expensive car supplement.
Capital allowances: Electric vehicles qualify for 100% first-year capital allowances, while petrol/diesel vehicles enter the special rate pool at 6% per year.
Employer NIC: Employers pay Class 1A National Insurance (15% from April 2025) on all BIK values—another reason to favour low-emission vehicles.
Frequently asked questions
How much is UK car tax per month?
If paying monthly via Direct Debit, the standard rate of £200 works out to approximately £17.50 per month (including 5% surcharge). The exact amount depends on your vehicle's tax band.
Do electric cars pay road tax?
Yes, from April 2025. New EVs pay a £10 first-year rate then £200 annually. Existing EVs pay £195- £200 per year. A pay-per-mile charge (3p/mile) will also apply from April 2028.
What happens if I don't tax my car?
Driving a vehicle without valid tax is illegal. Penalties include an £80 late licensing fine, a £1,000 court fine for continued evasion, clamping, and potentially having your vehicle crushed. ANPR cameras can automatically detect untaxed vehicles.
Can I transfer the car tax I've already paid for to a new owner?
No. Car tax doesn't transfer when you sell a vehicle. The new owner must pay the vehicle tax before driving it, and the previous owner receives an automatic refund for any remaining months.
When does a car become tax-exempt?
A car becomes eligible for a historic vehicle tax exemption when it reaches 40 years old, calculated from 1 January of the relevant year. For 2026, vehicles built before 1 January 1986 qualify.
How do I check if my car is taxed?
Use the free DVLA vehicle enquiry service at gov.uk/check-vehicle-tax. Enter your registration number to see the current tax status, expiry date, and MOT status.
Our UK car tax guide: key takeaways
The standard VED rate is £200 per year from April 2026 for most cars registered after April 2017.
First-year rates range from £10 (electric) to £5,690 (high emissions) based on CO2 output.
Electric vehicles now pay VED, ending their exemption from April 2025.
Company car BIK tax for EVs is 3% in 2025/26, rising to 9% by 2029/30.
The expensive car supplement (£425/year) applies to vehicles over £40,000 (EVs over £50,000 from 2026).
Historic vehicles (40+ years old) and disabled drivers may qualify for an exemption.
The pay-per-mile eVED (3p/mile) for EVs begins in April 2028.
Understanding car tax is essential for budgeting vehicle costs and ensuring legal compliance. With significant changes to electric vehicle taxation and ongoing adjustments to company car BIK rates, staying informed helps both individual drivers and fleet operators make cost-effective decisions.
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This article was written on Monday, 9th February 2026 and published on Wednesday, 11th February 2026. All information contained within is correct at the time of writing. We try our best to continue to update our guides, but not all guides are regularly reviewed - for the latest news and insight visit: rightfuelcard.co.uk/news-insights
