How Does Road Tax Work?

How does road tax get spent?

The money raised by drivers paying road tax into the central government fund is used to improve and maintain the UK road network. Vehicle Excise Duty provides the government with funds to do things like fixing potholes and generally making public roads safer.

How is road tax calculated?

Road tax is calculated based on how much CO2 a vehicle emits. This can also vary based on the age and year of registration of your car.

See the table below for the current road tax rates for your first-year tax payment, correct at time of publication.

If you want to find out the latest road tax figures, visit the UK Government website.   

What if my car was registered between 2001 and 2017?

For those who own a car registered between the 1^st March 2001 and 31^st March 2017, or are looking to buy a used car that was registered in this period, the road tax rates are slightly different.

If you want to learn more about past road tax figures, visit the UK Government website.  

What if my car was registered before 2001?

For cars registered before the 1^st March 2001, road tax is calculated by engine size.

If your engine is not over 1,549cc, you will be subject to a £230 payment. If your engine is over 1,549cc, you will be subject to a £375 payment.

For the most up to date government figures on this registration period, visit this dedicated Gov UK page.

Are any vehicles exempt?

If you own a vehicle that is over 40 years old, this vehicle becomes exempt from road tax. Cars aged over 40 years fall under the ‘historic vehicle tax exemption’, part of the government’s support to keep classic cars on the roads. As they are rarely used for daily commutes and often well-maintained by enthusiasts, cars over 40 years old are also exempt from having an MOT.

Until April 2025, electric vehicles were exempt from paying road tax due to having zero tailpipe emissions. However, following their rise in popularity, the government has decided to subject EVs to VED too. Owners of EVs registered after 1^st April 2025 will pay £10 for the first year with the second year and beyond capped at £200, provided the car is worth less than £40,000 when new. From the 1^st April 2028, a ‘pay-per-mile’ scheme will operate for EVs and plug-in hybrid drivers that will see electric drivers charged 3p per mile and plug-in hybrid drivers charged 1.5p per mile.

Higher Value Vehicles

Vehicles with a list price of more than £40,000 (petrol or diesel) or £50,000 (electric) are subject to an additional £440 annual fee.

You do not have to pay this fee if both of the following apply:

• You have a zero-emission vehicle
• The vehicle was registered before 1^st April 2025.

This rate is only payable for 5 years, from the second period that the vehicle is taxed. This means that if you’re looking at a premium used car that is over 6 years old, you won’t be subject to the additional cost.

Road tax may seem confusing at first but developing an understanding of how it works makes it much easier to factor into the overall cost of running a car. If you are in the market for a car that’s new to you, it is always worth confirming the latest rates before deciding, to ensure the car you choose fits your budget.