2023/2024 VED road tax: how does UK car tax work and how much will it cost you?

Vehicle Excise Duty (VED) – also known as road tax, car tax, or the road fund licence – can be a confusing topic to understand, with a number of factors, including the main VED tax bands and their associated charges, having undergone a number of significant changes over the years. 

The 2023/24 rates are being increased yet again in April 2023 to keep in line with inflation. Meanwhile, the last major changes came in April 2020, when calculations using WLTP (Worldwide Harmonised Light Vehicle Test Procedure) carbon dioxide emissions figures were introduced for the first time. Additionally, the supplement on cars worth more than £40,000 was scrapped for electric cars at this point.

How much will it cost to tax my car?

How much you pay to tax your car depends on when it is first registered: with the exception of inflationary increases, changes to the road tax system are not retroactively applied, so the system that was in place when a new car was first purchased will stand for as long as it is on the road – even though the annual rates payable are subject to inflationary increases.

If you're buying a new car today, you will pay road tax based on the current tax band system that was introduced on 1 April 2017, and most recently adjusted for April 2023 onwards. If you are buying a used car that was registered before April 2017, then the rate you pay will be based on the old VED system that applied at the time of first registration, even if the car is still in production.

The first thing to know about the UK’s current road tax system is that it is split into two main rates. The first tax rate applies during a new car’s first year on the road, and this varies depending on how much carbon dioxide it emits. After a new car has spent a year on the road, it will then be taxed on a second system; this is not affected by CO2 emissions, but is determined by how much the car cost when it was new.

Both the first and second year onwards tax rates are affected by what powers the car – electricity, conventional fuel, or a combination of the two.

First-year VED road tax rate

The first-year of road tax is included in a car’s on-the-road (OTR) price and is based on its carbon dioxide emissions. It ranges from £0 for zero-emission cars to £2,605 for models that emit 255g/km or more.

Formerly, nearly all new diesel cars sat one band higher for the first year rate because the Treasury decided to increase the first-year rate for diesels not meeting “the latest emission standards” – technically known as RDE2. It became a legal requirement for new diesel cars to meet RDE2 requirements in January 2021, so this is no longer an issue.

Regardless of this, sitting in a higher first-year tax band is no great hardship: many buyers will only be subject to a relatively minor one-off extra cost, which will be absorbed into the car’s on-the-road price. For example, as you'll see in the table below, cars emitting 111g/km to 130g/km of CO2 pay a first year rate of £210. 

From 1 April 2025, electric cars will lose their VED exemption. Owners will pay the lowest first year rate of VED, which is currently set at £10 per year.

Annual VED road tax rate

The current annual flat rate of road tax for the 2023/2024 tax year is £180 (up from £165 in the 2022/2023 financial year). There’s a £10 annual discount for alternatively fuelled vehicles (hybrids, mild hybrids and plug-in hybrids), so their owners pay £170 a year.

Cars that cost £40,000 or more (after options) are subject to a further £390 annual supplement (up from £355 in 2021/2022) that runs for five years. This kicks in after the first-year’s CO2-based charge, so you’ll pay the supplement from years two to six of the car’s life.

This means you’ll pay £570 a year (£560 for hybrids) for five years if your car tips the £40,000 barrier. After that, annual road tax reverts back to the £180 a year (£170 for AFVs) charge. Fully electric cars are the only exception to this rule – they're exempt from this charge altogether, as well as both first-year and annual road tax.

If you haggle a plus-£40,000 car down to below £40,000, you’ll still have to pay the supplement as it's based on the cost of the car for tax purposes. The £40,000 calculation also includes all options and trim levels, and there is effectively no escaping this surcharge.

It’s worth noting you can pay your car tax by monthly direct debit instead of annually. This will cost you slightly more due to interest, but is a useful option for those wanting to spread their payments. It will also preclude you from forgetting to pay your road tax, as the DVLA will automatically take payments each month. The DVLA should automatically cancel the direct debit if you sell the car or it’s written off, but it’s worth double-checking this eventuality, should it occur.

When EVs lose their VED exemption on 1 April 2025, they will pay the standard annual rate from the second year of registration onwards, currently set at £180 but likely to have increased by then in line with inflation. Hybrids will lose the £10 annual discount they currently benefit from.

UK VED tax band tables (2023/2024)

Cars above £40,000 pay a £390 annual supplement for five years from the second year of registration but electric cars are exempt from this.

If the tax system and its regular changes seems daunting, don't worry. Changes to the VED framework won't affect a car that has already been registered and is liable for annual road tax under a previous tax regime. With the exception of inflationary increases, a car's road tax system doesn't change once it's on the road.

Road tax for cars registered from 1 March 2001 to 31 March 2017

The Government first introduced emissions-based vehicle taxation in 2001, when it created tax bands for cars which increased in amount depending on the emissions produced by a car. When the most recent road tax format changes took place on 1 April 2017, all cars registered in the previous way had their tax frozen at the following rates:

VED road tax for cars registered 01/03/01 to 31/03/17. Note this older system of road tax is also subject to inflationary increases.

*The Band K rate also applies to cars that were registered before 23 March 2006 and have an emissions figure over 225g/km.

Road tax for cars registered before 1 March 2001

If you run a car that was registered before 1 March 2001, then it qualifies for another road tax system. This one is simply split into two, and is based on your car's engine capacity:

• Cars over 1,549cc: £325 a year
• Cars under 1,549cc: £200 a year

You can find out the size of a car's engine by logging on to the DVLA's vehicle enquiry service. All you need is the car's registration, and it will come back with the make and colour of the car before showing information about the engine capacity and other details about the car. If you have the car's V5C registration certificate (logbook), then you can enter the 11-digit reference number which will show you the tax rates for a vehicle. This applies to any car that's been registered and is on the road.

How to pay your car tax

Fortunately, the process of paying your VED is an easy one. The easiest way to do this is on the Gov.uk website, where there's a page entitled 'Tax your vehicle', here you follow a straightforward step-by-step process, most likely using a reference number from a V11 reminder letter you've been sent by the DVLA

You can also pay car tax at most Post Offices if you take your V5C with you. Additionally, the DVLA's 24 hour vehicle tax service can be telephoned on 0300 123 4321.

Taking your car off the road

If you are not going to use your car for a long period (anything longer than 6 months) you can use a Statutory Off Road Notification (SORN) to avoid paying road tax while you're not using it. However, off the road means off the road - you can't declare SORN unless you have off-street parking, a garage or some other kind of storage that's away from the public highway. Even if a car is parked in the road for a long period, it needs to have road tax to be parked there - ergo it also has to have an MoT and insurance to get tax in the first place.

You can make a SORN declaration at any time if you have the V5C registration document, or the more common way is to declare SORN when the vehicle's road tax reminder comes through the post from the DVLA. Then you can use the 16-digit renewal code to declare SORN. Once the vehicle has a SORN, you'll get written confirmation in the post, but you won't get any annual reminders about the vehicle's SORN status.

If you declare SORN while there's time left on the current road tax, you can reclaim the outstanding amount and get it refunded, although it will only be for a full month's tax, so from the first of the month after you declare a SORN.

When you want to put your vehicle back on the road, simply tax the vehicle and your SORN is cancelled automatically. The only time you can drive a vehicle that has been SORNed is if you're going to a pre-booked MoT appointment or other vehicle test. Drive it on the road for any other reason, and you could face a fine of up to £2,500.

If you're making a SORN declaration for a vehicle that isn't yours (if the owner has passed away, for example), then you need to apply for SORN by post using form V890 and filling out the relevant information, along with the information needed from the vehicle's V5C registration document.

Classic car road tax

You may have heard that some classic cars are exempt from road tax. This is true, although if you own a classic car, it's not simply a case of ignoring the DVLA reminders and going on your merry way. You have to apply for road tax exemption, and depending on the age of your classic car, there are still legal requirements you need to meet.

To qualify for exemption, a car has to be 40 years old or more. This is a rolling age, so more cars are eligible each year.

Owners need to apply for exemption before they can wave goodbye to paying road tax. You can do this at the Post Office so you'll need the car's V5C registration document, a road tax reminder (if you have one), a valid MoT and proof of insurance - the same as when paying road tax. The Post Office will then send your V5C off to the DVLA, who will then amend this and send you an updated logbook within 10 working days. In the meantime, you can still use your classic car.

There are a few more bits of legislation regarding classic cars, depending on the date they were registered:

• Classic cars registered from 1 January 1960: If you've applied for road tax exemption, you still need a valid annual MoT and insurance.
• Classic cars registered before 1 January 1960: All you need is valid insurance, there's no road tax to pay, and no MoT is needed either.

Whatever car you are looking at, whether you want to know when your own road tax is due, or if you want to find out about a potential used car's tax status and cost, then you can do exactly that at the Government website.

Remember the tax disc?

The system for collecting and enforcing road tax was overhauled in 2014, when the Government abolished the tax disc. After 93 years, it was decided that a small circle of paper in your windscreen was no longer necessary, and its abolition made the whole system cheaper to run. There is a catch, however, as you'll find out below.

The current road tax set-up makes it tougher for those seeking to avoid paying road tax. Rather than the visual check that the tax disc made possible, the authorities now rely on number-plate recognition cameras to determine that a vehicle has been taxed.

Although it’s no longer a requirement to display a tax disc in your windscreen, this doesn’t mean you don’t have to pay. The DVLA will send you a reminder when your road tax is up for renewal in the time-honoured fashion, and you can continue to pay your road tax online, over the phone or at the Post Office.

The existing options of paying for 12 or 6 months tax up front are still on offer (for most tax levels), but there’s also the option of paying your car tax monthly. This monthly option arrives in tandem with the facility to pay your road tax by Direct Debit.

Drivers paying in monthly instalments from a bank account will be subject to a 5% surcharge on top of the road tax price itself. However, that’s less than the 10% premium you'll pay when buying six months of road tax. Only the one-off annual payment comes with no extra charges.

The key advantage of paying your car tax by Direct Debit is that the DVLA will continue taking the payments until you tell them to stop. It means that you’ll no longer need to remember to pay your road tax once a year, although of course you still need to ensure that your car has valid insurance cover and an MoT certificate if it's over three years old.

What happens to your road tax when you sell your car?

Under the current system, any remaining road tax you have when you sell your car will not transfer to the new owner with the vehicle. Instead, the seller can get a road tax refund on any tax remaining on the vehicle, while the buyer has to pay to re-tax the car.

The tax refund on a sold car will be sent automatically when the DVLA receives notification that the car has been sold, scrapped, exported or taken off the road with a Statutory Off Road Notification (SORN).

Sellers are expected to inform the DVLA of any change of ownership straight away or face a £1,000 fine. If they don’t, they could also still be liable for speeding or parking fines incurred by the new owner.

Information on whether or not a car is taxed is available online via the Government website. All you need is the make and model of the car plus the registration number.

Is there a catch to the Vehicle Excise Duty regime?

So far, so good for the road tax system but as often seems to be the case, there is a catch.

When ownership of a vehicle is transferred, the previous owner gets a refund on any outstanding road tax, but that refund is calculated from the beginning of the next month. The new owner, on the other hand, has to tax the car anew and their bill is calculated from the beginning of the current month.

What do you think of the UK VED tax system? Let us know in the comments...