Car tax rules are changing: what are the new vehicle excise duty rates?

Drivers of electric or low-emission vehicles will need to start paying Vehicle Excise Duty (VED) from 1 April this year as measures announced last October start to come into effect.

Electric vehicles were previously exempt from having to pay vehicle tax but in the Autumn Budget, chancellor Rachel Reeves announced that all drivers will now have to pay the fee.

Heavily polluting vehicles will also be taxed at a higher rate come April as diesel cars that emit more than 250g/km of carbon pay £5,490 - a more than £2,000 hike from last year.

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The car tax changes come at the same time as increases in other bills in what has been dubbed “Awful April” Customers will start to see hikes in their energy, water, broadband, and mobile phone bills.

So what is VED and will you have to start paying it this April?

What is Vehicle Excise Duty?

Vehicle Excise Duty is a yearly tax levied on everyone who drives a car, van, motorcycle, or any other vehicle in the UK.

Every year, the tax increases in line with inflation. The new standard rate is £195.

While electric vehicle owners were previously exempt from paying the tax, drivers of all types of vehicles will have to pay it from April.

There are only two ways you can be fully exempt from paying VED. You do not need to pay if you are in receipt of Personal Independence Payment (PIP) and receive the enhanced mobility element of the benefit. This is only available to people 16 or over who have both a long-term physical or mental health condition or disability and difficulty doing certain everyday tasks.

You also will not need to pay if you receive the higher rate mobility component of Disability Living Allowance (DLA).

How much VED will I need to pay?

The amount of tax you will need to pay depends on the type of vehicle that you drive, as well as when you registered it.

Previously, drivers of hybrid vehicles were able to receive a £10 discount on VED, but this will no longer be the case after 1 April 2025.

If your car was listed for more than £40,000 then you will also be liable to pay the 'premium car tax'. This will add an additional £410 to your VED charge.

You may also pay more or less VED in the first year as you do in subsequent years.

Here’s a table showing how much VED you will need to pay depending on your vehicle’s carbon emissions in the first year it is registered. The following is only for vehicles registered after 1 April 2017:

From the second year onwards, you will only need to pay the standard rate of £195 annually.

If you drive a diesel car that does not meet the Real Driving Emissions 2 standard for nitrogen oxide emissions, you will have to pay the following rates in the first year:

Note that if your vehicle is off the road you do not have to pay tax on it unless you intend on driving it again. You need to make a SORN (Statutory Off Road Notification) to avoid this levy.

If your vehicle was registered between any time before April 2017 you will have to pay rates that differ from the ones above. If you don’t know when your vehicle was registered, or how much car tax you will need to pay then you can check on the DVLA website.

How can I pay less car tax?

If you drive an electric vehicle then you might be able to delay the car tax hike for an extra year, according to Sam Sheehan, motoring editor at EV reseller cinch. “Savvy EV drivers can get another year of free road tax if they renew by 31 March 2025,” he said.

“With as many as 1.4 million electric cars on UK roads, that’s a potential saving of £273 million from the new EV road tax cost.”

Drivers can do this by reviewing their car tax early on the government’s website before the 31 March deadline.

“The form will ask if they’re sure because, normally, renewing early changes the renewal date and means paying twice for road tax until the original renewal date. But since EV road tax is currently free, this doesn’t matter.”

For people who do not drive electric cars, however, there is no way to pay less car tax apart from switching to a different vehicle.

Is vehicle excise duty the same as road tax?

Yes, VED is the same as road tax. It is also sometimes known as vehicle tax or car tax.

However, in order to drive your car on public roads, you are legally required to take out a car insurance scheme. This can be expensive, especially for young, new, or accident-prone drivers.

If you want to reduce car costs, we have a list of 18 tips to drive down your car insurance premiums.

How to pay Vehicle Excise Duty

In order to pay VED, you must know your reference number. This can be found in:

• A recent vehicle tax reminder or ‘last chance’ warning letter from DVLA
• Your vehicle log book (V5C)
• The green ‘new keeper’ slip from a log book if you’ve just bought it

If you do not have any of these documents, you’ll need to apply for a new log book.

Once you have your reference number, you can pay your VED online using a debit or credit card or direct debit. You can also pay over the phone or at a Post Office.

Bear in mind that even if you do not have to pay any VED, you must still declare this online.

Does car tax auto-renew?

If when you first paid your car tax you opted for a direct debit, then your car tax will automatically renew. This means that the money will be taken directly from your bank account automatically and means that your car is always taxed.

If you did not opt for a direct debit, your car tax will not auto-renew. To ensure continued coverage, you will need to manually pay your car tax every year in the ways outlined above.