What Is Road Tax (VED) and How Does It Work?

Road tax is one of those costs of owning a car that everybody knows exist, but not everybody knows exactly how it works.

Why does one car cost more than another? Do electric cars pay road tax? What happens when you sell your car? And what exactly is VED?

The good news is that it isn't quite as complicated as it first appears.

Road tax, officially known as Vehicle Excise Duty (VED), is a tax paid on most vehicles that are driven or kept on public roads in the UK. How much you pay can depend on several things, including when your vehicle was first registered, its C02 emissions, fuel type and for some of the newer cars, its original list price.

Here, we'll break down how road tax works, what you could expect to pay and a few of the rules worth knowing before you buy your next car.

What is Road Tax?

Despite everybody calling it road tax, the official name is actually Vehicle Excise Duty, or VED for short.

For most cars used or kept on public roads in the UK, VED needs to be paid. One common misconception is that the money collected through road tax is specifically used to maintain Britain's roads. In reality, the money accumulated from VED goes into general government funds rather than directly paying for potholes, resurfacing and other road maintenance.

So, unfortunately, paying your road tax doesn't give you personal ownership of your favourite roundabout.

How much VED you pay isn't necessarily the same as the person parked next to you. The system has changed several times over the years, meaning your car's registration date can make a significant difference. For cars registered from 1st April 2017, there is generally a first-year rate followed by a standard annual rate. Cars registered before this date can fall into different systems.

How Much is Road Tax in 2026?

For cars registered from 1st April 2017, the standard annual VED rate in 2026 is £200. However, that doesn't mean every car costs £200 to tax. When a brand-new car is first registered, its first-year road tax rate is based largely on its c02 emissions. Generally, the more C02 a vehicle produces, the higher its first-year VED will be.

Here's how the current first-year rates break down:

Rates shown are for petrol cars, diesel cars meeting the RDE2 standard, alternative-fuel vehicles and zero-emission vehicles. Different first-year rates can apply to diesel vehicles that do not meet the RDE2 standard.

What happens after the first year?

Once the first year is over, things get a little bit easier. Cars registered from 1st April 2017 generally move onto the standard annual VED rate of £200 from their second year onwards. Some higher-value vehicles can also be subject to an additional £440 annual charge, but we'll com onto that shortly.

What about older cars?

This is where things can get a little bit more complicated. Cars registered between 1st March 2001 and 31st March 2017 continue to use a C02 based banding system, so their annual VED depends on their emissions.

Cars registered before 1st March 2001 use another system based primarily on engine size.

Rather than trying to memorise three different tax systems, the easiest option is to check your individual vehicle using the government's vehicle tax service.

Do electric cars pay road tax?

Yes.

This is an important one because you'll still find plenty of older information online saying that electric cars are exempt from road tax. The rules changed in April 2025, meaning electric vehicles are now subject to VED too. Current 2026 rates put a newly registered zero-emission vehicle at £10 for its first year, before moving to the standard rate of £200 per year.

So while going electric can still change plenty of your vehicle's running costs, free road tax is no longer one of the benefits.

There are also further changes planned for electric and plug-in hybrid vehicles from April 2028, including a mileage-based element to VED. As those rules are still in the future, we'd always recommend checking the latest government guidance closer to the time rather than trying to plan your 2028 motoring budget today.

What Is The Expensive Car Supplement?

This is another part of VED that's particularly useful to understand when you're shopping for a new car. Some higher-value vehicles are subject to an additional charge known as the Expensive Car Supplement (ECS), sometimes referred to as the luxury car tax.

Under the current rules, petrol, diesel and other qualifying vehicles with an original list price of more than £40,000 can attract an additional £440 per year on top of the standard VED rate. From April 2026 the threshold for electric vehicles is more than £50,000. This is based on the vehicles original published list price before any discounts, rather than necessarily what you actually paid for it.

The additional charge applies for five years, starting from the second time the vehicle is taxed. That means a vehicle paying the £200 standard rate plus the £440 supplement would currently cost £640 per year during that period.

This is definitely something worth checking when comparing cars, particularly if a model or optional extras push its original list price over the relevant threshold.

What Happens To Road Tax When I Buy or Sell a Car

Here's a rule that has plenty of people out over the years:

Road tax doesn't transfer with the car.

If you buy a used car, you need to tax it yourself before driving away. It doesn't matter if the previous owner had only renewed their tax the week before, their VED doesn't come with the vehicle. If you're selling or part exchanging your car, you'll need to tell the DVLA that you're no longer its registered keeper. Any road tax covering complete remaining months should then be refunded automatically.

It's a relatively small detail in the excitement of changing cars, but definitely one worth remembering before heading home in your new purchase.

How Do I Tax My Car?

Thankfully, actually taxing a vehicle is much simpler than understanding all the different tax bands. The easiest method is usually online through the government's vehicle tax service. Depending on your circumstances, you'll generally need the reference number from one of the following:

• Your V11 vehicle tax reminder
• Your V5C logbook
• The V5C/2 new keeper slip if you've just bought the vehicle

You can choose to pay annually, every six months or by monthly direct debit, although paying in instalments can cost slightly more overall. You can also check online whether a vehicle is currently taxed, which can be useful if you've forgotten exactly when yours is due.

Do All Cars Have To Pay Road Tax?

Most vehicles used on public roads need to be taxed, although there are some exemptions. Certain historic vehicles and vehicles used by eligible disabled people, for example, can qualify for an exemption.

There's also SORN, or Statutory Off Road Notification. If you're keeping a vehicle completely off public roads, you can declare SORN rather than continuing to tax it. Remember that off road really does mean off road. A SORN vehicle should be kept on private land rather than parked outside your house on a public street.

And even where your vehicle qualifies for a £0 or exempt tax class, you may still need to complete the appropriate vehicle-tax process.

What Happens If I Forget To Tax My Car?

It's best not to find out first-hand. The DVLA keeps electronic records of taxed vehicles, and Automatic Number Plate Recognition (ANPR) technology can be used to identify vehicles being driven without tax. The old paper tax disc may have disappeared from our windscreens in 2014, but that certainly didn't mean the tax disappeared with it.

Penalties can be issued for keeping or using an untaxed vehicle, and enforcement can ultimately include clamping or removing the vehicle.

If you're the registered keeper, you should normally receive a reminder when your tax is approaching renewal. Setting up a direct debit can also make things easier, as eligible payments can renew automatically.

Road Tax Doesn't Have to Be Complicated

VED can look confusing when you're faced with tax bands, C02 figures, registration dates and additional supplements all at once. But for most drivers, you only really need to remember a few things.

Your car's age and registration date matter, new cars can have a different first-year rate, electric cars now pay VED, and higher-value vehicles may attract an additional charge.

And, more importantly, don't assume the road tax on one car will be the same on another.

If you're looking at buying a new or used car and aren't sure about its road tax or other running costs, our team at TMS Motor Group will be happy to talk you through them, Sometimes it's much easier to ask a human than spend half an hour staring at a government tax table wondering which row applies to you.