What is car tax and why do I need it?

Car tax is officially known as Vehicle Excise Duty (VED), but sometimes also called ‘road tax’.  

VED is a charge people pay to drive or keep cars and other vehicles (such as motorbikes and heavy goods vehicles) on public roads in the UK. It is overseen and collected by the Driver and Vehicle Licensing Agency (DVLA). 

When it was first introduced in the 17th century, the money from car tax was paid into a special fund to pay for building and maintaining roads. But the cash is now pooled with other tax payments, and roads are maintained out of general taxation.  

The VED system has gone under several changes in the past couple of decades; some cars are taxed under historical systems, others under a new system. To make things even more complex, car tax rates change each April in line with inflation, meaning how much drivers pay goes up each year. 

More changes are on the way – for example, electric car drivers will pay car tax for the first time from 2025. 

This guide will set out the current situation for road users regarding car tax, and current VED bands. 

How is car tax calculated? 

There are currently four different systems of VED or road tax.   

Which one applies to you depends on the year and month your car was first registered. A new car is registered by the dealer or seller before being sold for the first time.  

There are three date categories: 

• before 1 March 2001 

• between 1 March 2001 and 31 March 2017 

• on or after 1 April 2017 

You can check the current tax rates for your vehicle and if your car is taxed by visiting https://www.gov.uk/check-vehicle-tax 

Cars registered before 1 March 2001 

If you have a car or ‘light goods vehicle’ registered before 1 March 2001, the VED rate is based on engine size. 

There are two categories: below 1549cc and over 1549cc. 

These costs apply if you pay for a year’s tax upfront or by annual direct debit. You’ll pay more if you pay monthly or every six months. 

Cars registered between 1 March 2001 and 31 March 2017 

VED road tax rates for cars first registered between March 2001 and April 2017 are divided into 13 bands depending on the CO2 emissions of the vehicle.  

The lower the CO2 emissions, the lower the tax band, and the less you’ll pay. 

VED for alternative-fuel cars – such as hybrids, plug-in hybrids, and those that run on liquified petroleum gas (LPG), compressed natural gas (CNG) or biofuel – is £10 cheaper than petrol or diesel cars. 

Cars registered on or after 1 April 2017 

A new car tax regime came into effect on 1 April 2017 and applies to vehicles registered on 1 April 2017 or after.  

Under this system, the first year a car is on the road, car tax is still related to the car’s emissions (but the bands are different than for cars registered before 1 April 2017). This first year tax has been dubbed the ‘showroom tax’. 

In the first year, you will also have to pay extra if you have a diesel car that doesn’t meet the Real Driving Emissions 2 (RDE2) standard for nitrogen oxide emissions. But you’ll pay less if you drive an alternative fuel car.  

Then, from the second year, there are different rates for petrol/diesel cars, electric cars and vehicles running on alternative fuels. From the second year, for five years, you’ll also pay a £390 a year supplement if your vehicle has a list price of more than £40,000 (unless it has zero emissions).  

The ‘list price’ is the published price of the vehicle before it’s registered for the first time (not necessarily the price you paid for it).  

So, in summary, under this system, you’ll pay: 

• First year - showroom tax (based on emissions) 

• Years two to six – standard rate tax plus £390 if the list price is £40k+ 

• Years six onwards – standard rate tax 

First year car tax rates 

Second year (and onwards) tax rates 

What will change in 2025? 

The car tax regime will change again from 1 April 2025. From this date, electric car owners will be charged: 

• VED for the first time, at the standard rate  

• the £390 premium if the car’s list price was £40,000 or more  

• first-year showroom tax (currently £10 a year) 

How do I pay my car tax? 

Exactly how much you pay for car tax also depends on how you pay. Your options are: 

• single payment every 12 months 

• direct debit every 12 months 

• monthly direct debit for 12 months 

• single six-month payment 

• direct debit every six months 

The cheapest option is to pay for 12 months VED in one go. Paying every month or every six months costs more. 

For example, the standard car tax for a petrol or diesel car registered after April 2017 is £180. But it will cost: 

• £189 if you pay by 12 monthly direct debit payments (£15.75 a month) 

• £198 if you pay by 2 six-monthly payments (£99 per six months) 

• £189 if you pay by 2 six-monthly direct debit payments (£94.50 per six months) 

You can pay car tax on the Gov.uk website, where there's a page entitled 'Tax your vehicle'. The DVLA will send you a reminder when your car tax is due – this is called a V11 letter and will contain a reference number. 

You can also pay car tax at most Post Offices if you take your V11 or V5C with you. Alternatively, the DVLA's 24-hour telephone vehicle tax service is on 0300 123 4321. 

You need car insurance before you can tax your car. 

What happens to car tax if I sell my car? 

You cannot transfer VED on a car from one person to another. So, if you sell your car you will need to reclaim a refund of any unused tax.  

For example, if you buy 12 months’ car tax and sell your car after seven months, you’ll get five months back. The new owner will need to tax the car straight away. 

How do I check my car's first registration date? 

Your car’s registration date is the key date which determines which system is used to tax your car. Your car’s registration date is fixed – it doesn’t matter how many times the car is bought and sold. 

To find your car’s registration date: 

• Check your car's V5C document (the ‘logbook’) 

• visit the DVLA's 'get vehicle information' service and enter your registration 

This free service also shows your car’s CO2 emissions which determine which car tax band your vehicle is in under the 1 March 2001 and 31 March 2017 system. 

What happens if I don’t pay my car tax? 

Drivers haven’t been obliged to display a tax disc since 2014. Instead, records are held electronically.  

If the police want to check your car is taxed they use a network of Automatic Number Plate Recognition (ANPR) cameras which link up to the DVLA VED database. 

Don’t forget to pay your car tax – you’ll be fined £80 if you don’t tax your vehicle; you’ll also have to pay for the time it was not taxed. 

If you don’t pay your fine, your vehicle could be clamped or crushed, or your details passed to a debt collection agency. 

If you are unable to drive for a period of time, you can register for a Statutory Off Road Notification (SORN) – but you’ll need to keep your car somewhere other than on a public road (i.e. a garage or private parking space) and not drive it. If you want to keep your vehicle on a public road you must still tax it, even if you don’t drive it. 

Which cars are exempt from car tax? 

Some types of vehicles are exempt from car tax. These include: 

• vehicles used by a disabled person 

• disabled passenger vehicles 

• historic vehicles (made before 1 January 1983) 

• mobility vehicles and powered wheelchairs 

• electric vehicles (but this will change in 2025) 

• vehicles used for agriculture, horticulture and forestry 

• vehicles with a SORN 

If any of the above applies to you, you’ll need to apply for a vehicle tax exemption (don’t just leave the vehicle untaxed).