Vehicle Tax Calculator Guide

Vehicle Excise Duty (VED), commonly known as road tax or car tax, is an annual tax on vehicles used or kept on public roads. This guide explains the current tax system and helps you understand what you'll pay.

How Vehicle Tax Works

The amount you pay depends on when your vehicle was first registered:

• Registered 1 April 2017 onwards: New CO2-based system (covered in this guide)
• Registered 1 March 2001 - 31 March 2017: Based on CO2 emissions bands (A-M)
• Registered before 1 March 2001: Based on engine size

First-Year Rates (2025/26)

For cars registered on or after 1 April 2017, first-year rates are based on CO2 emissions:

Standard Rates (Year 2 Onwards)

After the first year, most vehicles pay a flat rate:

*Electric vehicles will pay £190 from April 2025

Expensive Car Supplement

Cars with a list price over £40,000 when new pay an additional £410 per year for 5 years (years 2-6 of ownership):

Cars Registered March 2001 - March 2017

Older cars use a different banding system (A-M) based on CO2 emissions:

Payment Options

You can pay vehicle tax:

• Annually: Full amount upfront
• Six-monthly: Slightly more (5% surcharge)
• Monthly by Direct Debit: 5% surcharge, but spread over 12 payments

Exempt Vehicles

Some vehicles are exempt from vehicle tax:

• Vehicles used by disabled people (certain criteria)
• Historic vehicles (registered before 1 January 1984)
• Electric vehicles (until April 2025)
• Vehicles used for agriculture, horticulture, forestry
• MOT failure - SORN declared

SORN (Statutory Off Road Notification)

If your vehicle is off the road (not driven or parked on public roads), you can declare a SORN to stop paying tax:

• Remains valid until you tax the vehicle or sell it
• Vehicle must be kept on private land
• No MOT required while SORN is active
• Insurance is optional (but recommended)

Checking Your Vehicle Tax

Check if a vehicle is taxed using the DVLA's free service:

1. Go to GOV.UK vehicle enquiry
2. Enter the registration number
3. View tax and MOT status

Company Car Tax (BIK)

If you have a company car, you pay Benefit in Kind (BIK) tax based on:

• Car's P11D value (list price including options)
• CO2 emissions (percentage rate)
• Your income tax rate

Electric vehicles currently have very low BIK rates (2% in 2025/26), making them tax-efficient for company car drivers.

How Vehicle Excise Duty Is Calculated

Vehicle Excise Duty (VED), commonly known as road tax or car tax, is calculated differently depending on when a vehicle was first registered. For cars registered on or after 1 April 2017, VED uses a two-tier system. The first year rate is based on the vehicle's CO2 emissions, with rates ranging from £0 for zero-emission vehicles to over £2,600 for the most polluting cars. From the second year onwards, all petrol and diesel cars pay a flat standard rate, currently £190 per year, regardless of emissions. Electric vehicles registered after April 2017 pay £0 in VED until April 2025, after which they will begin paying the standard rate.

For cars registered between 1 March 2001 and 31 March 2017, VED rates are based entirely on CO2 emissions, with 13 bands from A (up to 100 g/km, £0) through to M (over 255 g/km, currently £695 per year). These bands apply for the lifetime of the vehicle, making lower-emission cars from this era particularly cheap to tax. Cars registered before 1 March 2001 are taxed based on engine size, with vehicles of 1,549cc or below paying approximately £190 and larger engines paying approximately £350.

The expensive car supplement adds an additional £410 per year to VED for cars with a list price exceeding £40,000 when new, payable from year 2 through year 6 of ownership (five additional years). This supplement applies regardless of the vehicle's emissions. Combined with the standard rate, owners of expensive cars pay approximately £600 per year during this period. The supplement was introduced to ensure that buyers of premium vehicles contribute more to road maintenance, though it also catches some electric vehicles that exceed the £40,000 threshold.

Electric and Hybrid Vehicle Taxation in the UK

The UK government has used vehicle taxation as a key policy lever to encourage the transition to electric vehicles. Pure electric vehicles (BEVs) currently benefit from zero VED until April 2025, zero Benefit in Kind tax rate of 2 percent for company car drivers, exemption from the London Congestion Charge and Ultra Low Emission Zone charges, and eligibility for the OZEV chargepoint grant of up to £350 for home charging installation.

Plug-in hybrid vehicles (PHEVs) receive reduced but not zero tax benefits. Their VED is based on CO2 emissions, which are typically very low on the official WLTP test cycle but may be higher in real-world driving if the battery is not regularly charged. BIK rates for PHEVs with electric ranges of 130 miles or more are 2 percent, rising to 14 percent for those with ranges under 30 miles. The tax advantage of PHEVs is therefore greatest for drivers who regularly charge the vehicle and use electric mode for most journeys.

From April 2025, electric vehicles will begin paying VED for the first time, though at reduced rates initially. The first-year rate for zero-emission cars will be the lowest band rate, and the standard rate will apply from year 2. This change reflects the growing proportion of EVs on UK roads and the need to maintain tax revenue as the vehicle fleet transitions away from fossil fuels. Despite the introduction of VED, the overall running cost advantage of electric vehicles remains significant when factoring in lower fuel costs, reduced maintenance, and favourable BIK rates.

Frequently Asked Questions

What happens if I do not tax my vehicle?

Driving an untaxed vehicle on UK roads is a criminal offence. The DVLA uses Automatic Number Plate Recognition (ANPR) cameras to identify untaxed vehicles, and enforcement is highly automated. If caught, you face an initial £80 fine (reduced to £40 if paid within 28 days), and the vehicle may be clamped or impounded. If the case goes to court, fines can reach up to £1,000. Additionally, if a vehicle is not taxed and not declared SORN, the DVLA can impose a continuous insurance enforcement penalty. Keeping your vehicle continuously taxed or declaring SORN when not in use avoids all of these penalties.

Can I transfer road tax when I sell my car?

No, vehicle tax cannot be transferred between owners. When you sell a vehicle, the remaining VED is automatically cancelled and a refund for any complete months remaining is issued to the previous keeper by the DVLA. The new owner must tax the vehicle in their own name before driving it, even if the previous owner's tax has not yet expired. This system was introduced in 2014 when paper tax discs were abolished. The new owner can tax the vehicle immediately online, at a Post Office, or by phone using the V5C/2 green slip from the vehicle logbook.

Is it cheaper to pay vehicle tax monthly or annually?

Annual payment is the cheapest option as it involves no surcharge. Monthly direct debit payments attract a 5 percent surcharge, and six-monthly payments carry a 10 percent surcharge per half-year. For the standard rate of £190, monthly payments total approximately £199.50 per year (an extra £9.50), while two six-monthly payments total approximately £209 per year (an extra £19). If cash flow is not a concern, annual payment is always the most economical choice. However, the convenience of monthly payments may outweigh the small additional cost for some vehicle owners.

James Mitchell, ACCA

Chartered Accountant & Former HMRC Advisor

James is a Chartered Certified Accountant (ACCA) specialising in UK personal taxation and financial planning. With over 12 years in practice and a background as a former HMRC compliance officer, he brings authoritative insight to complex tax topics.