Car tax bands in 2026 with millions of drivers facing £240 increase soon

Car tax rules can be confusing, but here’s everything you need to know about vehicle excise duty (VED) and the major changes coming.

Keeping track of car tax (officially termed vehicle excise duty or VED) regulations can be challenging, with the millions of vehicles on our roads divided into various categories, resulting in different charges for motorists.

The car tax you’re required to pay hinges on multiple factors, including when your vehicle was initially registered, its purchase price, the type of fuel it runs on and its CO2 emissions. Whether your vehicle is electric also plays a role. Additionally, the sum you’re liable for frequently changes yearly, with fresh regulations often brought in to address evolving circumstances and the arrival of new technology.

Generally speaking, most motorists in the UK pay £200 annually for car tax in 2026. Though this rises considerably for those with vehicles costing over £40,000, who must pay an extra £440.

And there’s a major shift on the horizon in April 2028 which will impact the roughly two million electric vehicle drivers (that’s the present number of electric cars on our roads and there are likely to be more by April 2028).

UK Chancellor Rachel Reeves revealed in her budget fresh regulations which will see electric vehicle (EV) drivers pay 3p per mile while plug-in hybrid drivers will pay 1.5p per mile. According to the Government, the typical electric car driver covering 8,000 miles annually will pay an additional £240 per year on top of the existing vehicle excise duty rate.

However, there’s some positive news for electric vehicle owners: the costly car tax surcharge or “luxury car tax” will only be applied to electric vehicles priced above £50,000, rather than £40,000 as it stands for petrol and diesel cars, reports Wales Online.

How much is my car tax in 2026?

The VED amount you’re required to pay varies depending on numerous factors, but here are the main points:

• The standard tax rate for all petrol, diesel or hybrid cars registered after April 1, 2017 is £200.
• If your vehicle had a list price that exceeded £40,000 when first sold (or £50,000 if electric) you may also be liable for the ‘luxury car tax’ fee, which adds £440 to the annual VED cost, taking it to £640.
• If you drive an electric car in April 2028 you will pay an extra 3p per mile (or 1.5p for hybrid cars), meaning an additional £240 for cars that do 8,000 miles a year.
• If your car was registered before March 1, 2001, it depends on engine size and you either pay £230 a year or £375 a year. You can see the engine size details here.
• If your car was registered between March 2001 and April 2017 the amount of car tax you pay will be one of 13 bands between £20 and £790, depending on the CO2 emissions of the vehicle (the lower the CO2, the lower the tax). You can find every band on the UK Government website.

How is my car tax calculated?

As a general rule, car tax bands are determined based on the following principal criteria:

• The date the car was first registered
• How much it cost when it was new
• The type of fuel it uses (petrol, diesel or electric)
• The level of CO2 it produces

What happens if I don’t pay car tax?

Unless you qualify for car tax exemption (see exemptions below), you must pay it immediately upon taking ownership. Failure to do so will initially result in an £80 penalty, though this can escalate to £2,500 or five times the tax amount due. Your vehicle could also face clamping.

Do I have to pay car tax?

The following vehicles are the only ones exempt from vehicle tax, though you’ll still need to apply for it:

• Vehicles used by a disabled person
• Disabled passenger vehicles
• Mobility scooters, powered wheelchairs and invalid carriages
• Historic vehicles built more than 40 years before 1 January of the current year
• Mowing machines
• Steam vehicles
• Vehicles used just for agriculture, horticulture and forestry.