From 1 April 2026, changes have been made to the UK’s Vehicle Excise Duty (VED) system, which affects cars across the board. Vehicle Excise Duty is the formal word for car tax, and drivers will need to pay more of it to keep their cars on the road.
It’s not too straightforward in how it works. So, if you’re thinking about changing your car or even running your current one for longer, how do you know what to expect to pay?
Below is our crystal-clear guide to what Vehicle Excise Duty (road tax) is, how it works, and what changed for 2026/27.
Do I need to pay car tax?
Yes, Vehicle Excise Duty must be paid for a car to be driven on the UK road network. If you’re driving a car on the public roads, it must be taxed.
This consists of an annual, biannual or monthly charge (depending on your choosing) for your individual vehicle. How much you pay depends on what tax bracket the car falls into.
There are two occasions when you don’t need to pay car tax; one is if you own a vehicle that falls under a payment exemption. The most prominent being for vehicles over 40 years old, qualifying them for historic status. Tax, in this instance, is free.
The other is if you’ve declared a statutory off-road notification (SORN), meaning the vehicle in question is officially not registered to drive on the road until the SORN is removed and the tax is paid again.
Could I save money beyond tax?
Car tax isn’t the only cost that’s rising for UK drivers. Insurance premiums can vary massively depending on your car, mileage, and personal profile.
Before committing to a new vehicle or even renewing your current policy it’s worth checking if you could save on your insurance. At mustard.co.uk, you can compare some of the UK’s leading insurance providers in minutes to find the right prices and policies for you – Compare Now
Standard Vehicle Excise Duty increase to £200
From 1 April 2026, the standard rate of VED increased from £195 to £200 for the 2026/27 financial year. Since 2010, this VED rate has risen every year in line with inflation. This fee applies to cars made after 2017 from the second year in which they are taxed and is paid on top of a vehicle’s First Year Rate.
First Year Rates increase up to £5,690
The aptly-named First Year Rate (informally known as ‘showroom tax’) applies to cars made after 1 April 2017 and is paid in the first year that they’re taxed and is based purely on CO2 emissions before the £200 standard rate applies from year two. Fully electric cars are still £10 as they were last year, but in every other CO2 category, there’s a slight bump in cost.
How much the First Year Rate is changing by in 2026/27
| CO2 emissions (g/km) | First-year rate 2025/26 | First-year rate 2026/27 |
| 0g/km | £10 | £10 |
| 1 – 50 | £110 | £115 |
| 51 – 75 | £130 | £135 |
| 76 – 90 | £270 | £280 |
| 91 – 100 | £350 | £365 |
| 101 – 110 | £390 | £405 |
| 111 – 130 | £440 | £455 |
| 131 – 150 | £540 | £560 |
| 151 – 170 | £1,360 | £1,410 |
| 171 – 190 | £2,190 | £2,270 |
| 191 – 225 | £3,300 | £3,420 |
| 226 – 255 | £4,680 | £4,850 |
| Over 255 | £5,490 | £5,690 |
Changes to luxury car tax for 2026/27
To make matter slightly more complex, there’s also a luxury car tax threshold, officially known as the Expensive Car Supplement (ECS). In short, petrol, diesel or hybrid vehicles that cost £40,000 or more when brand new are required to pay an additional £440 on top of the standard rate from years two to six.
In 2025, this also applied to electric cars from £40,000 onwards. However, from 2026, the threshold has increased to £50,000 for EVs. To provide an example: in the second year in which it’s taxed, a petrol-powered car that was £42,000 when new is subject to a £200 standard rate as well as the £440 Expensive Car Supplement, bringing the total to £640 per year until the sixth year.
The same £640 annual fee applies to EVs, but only to those that were £50,000 or more when new.
What is the new pay per mile and how does it work?
As part of the latest budget, chancellor Rachel Reeves unveiled a new tax policy for electric vehicles (EVs). The details are still being finalised, and it won’t be rolled out until Spring 2028 at the very earliest, but here’s what you need to know.
Quite simply, it works by taxing electrified vehicles based on milage. Full EVs will pay three pence per mile and plug-in hybrid electric vehicles (PHEVs) are also looped in with a 1.5 pence per mile charge.
It’s being introduced to effectively level out the playing field between drivers of EVs and those that are sticking with petrol or diesel. As EV drivers don’t pay fuel duty, it makes up for lost revenue from central government. If you’re wondering, yes, fuel duty still applies to PHEV drivers, hence the lower 1.5p rate to make up for it.
To provide an example, let’s say you’re driving 10,000 miles a year in your EV. You’ll be charged £300 a year. This doesn’t include the First Year VED rate – otherwise known as ‘showroom’ tax – which is £10 for zero-emission vehicles. It hasn’t been fully confirmed yet as to how the mileage will be calculated.
So, what are the tax brackets for older cars?
Cars fall into certain tax brackets based on the following criteria:
- When they were produced
- How much CO2 exhaust emissions they produce
- How much the car cost when it was new (applies for five years after the second year of registration)
- The type of fuel that powers it
Below is a series of tables that outlines the costs of the tax brackets in question. If you’re unsure of how much tax you should pay for your next car, you can use the Parkers tax checker here.
New rates for 2026/27 – cars manufactured between March 2001 and April 2017
This table applies to a vehicle’s annual VED (tax) charge based on the amount of CO2 it produces.
How much the VED for 2001-2017 cars increased from 2025/26
| CO2 Emissions | Annual Tax Rate 2025/26 | Annual Tax Rate 2026/27 |
| Up to 100g/km | £20 | £20 |
| 101-110g/km | £20 | £20 |
| 111-120g/km | £35 | £35 |
| 121-130g/km | £165 | £170 |
| 131-140g/km | £195 | £200 |
| 141-150g/km | £215 | £225 |
| 151-165g/km | £265 | £275 |
| 166-175g/km | £315 | £325 |
| 176-185g/km | £345 | £360 |
| 186-200g/km | £395 | £410 |
| 201-225g/km | £430 | £445 |
| 226-255g/km | £735 | £760 |
| Over 255g/km | £760 | £790 |
New rates for 2026/27 – cars manufactured after April 2017
This table applies to what the first year rate (showroom tax) of a new vehicle is followed by the standard rate of £200 for all cars which is charged from the second year of the car being registered. This doesn’t include the luxury car tax, which is £440 a year for the first five years in which the standard rate is applied.
How much the First Year Rate is changing by in 2026/27
| CO2 emissions (g/km) | First-year rate 2025/26 | First-year rate 2026/27 |
| 0g/km | £10 | £10 |
| 1 – 50 | £110 | £115 |
| 51 – 75 | £130 | £135 |
| 76 – 90 | £270 | £280 |
| 91 – 100 | £350 | £365 |
| 101 – 110 | £390 | £405 |
| 111 – 130 | £440 | £455 |
| 131 – 150 | £540 | £560 |
| 151 – 170 | £1,360 | £1,410 |
| 171 – 190 | £2,190 | £2,270 |
| 191 – 225 | £3,300 | £3,420 |
| 226 – 255 | £4,680 | £4,850 |
| Over 255 | £5,490 | £5,690 |
New rates for 2026/27 – cars registered before 1 March 2001
This table applies to the tax charges of older vehicles which are classed as ‘Personal Light Goods’ (PLG) vehicles. Many modern classics fall into this category which aren’t quite old enough to be free from tax charges (40+ years).
| PLG Tax Class 11 | 12 Months | Six months |
| 1549cc or under | £230 | £126.50 |
| Over 1549cc | £375 | £206.25 |
