Road tax now and how it could change

The road tax system in the UK has changed over the years and is set to do so again soon. We provide a full run down of how road tax works in the UK, the current rates and what is on the horizon.

What is road tax?

Road tax in the UK is formally known as vehicle excise duty (VED). It is a duty that keepers of all registered vehicles in the UK are required to pay. Even if no charge is due the vehicle still has to be road tax registered.

How do the tax rates vary?

The rates vary depending on the type of vehicle, when it was registered, how much carbon dioxide it emits from its exhaust and what its list price was when it was purchased.

Road tax has become more complicated over the years. There are now three systems in play for taxing cars and light vehicles depending on the date they were first registered. The tax rates for all vehicles can be found on the GOV.UK website.

Tax rates for cars registered after 1 April 2017

The most recent road tax scheme relates to newer cars and is the most complicated. What you pay comes down to three different elements:

  1. Year 1: You pay an amount linked to the car’s carbon dioxide emissions. The higher the CO2 emissions the more you have to pay.
  2. Year 2 and thereafter: You or the subsequent keeper pays a standard rate. This is £0 for an electric vehicle, right up to £189 for 12 months if you pay monthly by Direct Debit.
  3. List price over £40,000: If the list price of the car was over £40,000 when new then you or any subsequent keeper has to pay an additional £390 supplement (on top of the standard rate) for 5 years – from year 2 to year 6 inclusive. Electric vehicles are currently exempt from this supplement.
Road tax discs
Tax discs that were phased out in the UK in 2014

What happens to the road tax payments I make?

The Driver and Vehicle Licensing Agency (DVLA) collect the funds which are handed over to the Treasury. Annually this amounted to £7bn in 2022 and is expected to rise to £8bn in 2023. This money is added to a central Government pot. It is spent on the full range of public services such as the NHS, schools, military, police etc. Contrary to popular belief the funds are not allocated just to fix and build roads.

How do I know if a vehicle has been taxed?

You can check if a vehicle is taxed, and how much it costs to tax, by running a free Total Car Check. We also provide lots of other information about the vehicle including its full specification, MOT history and fuel economy. The check a vehicle is taxed GOV.UK service provides some information but doesn’t tell you how much it costs to tax a vehicle.

How do I tax my vehicle and update my details?

The easiest and fastest way is by using the Government’s online tax a vehicle service. You will need to have the vehicle’s reference number from the pink V5C registration certificate / logbook. You should have received this from the seller when you took delivery of the vehicle.

If your name changes, you change address or bank details then you will need to update the road tax details the DVLA holds for you. Changes of name and address will also require you to update your driving licence, vehicle logbook (V5C) and your personalised number plate documents (if you have a personalised/cherished plate).

What about if my vehicle is not currently in use?

If the vehicle is off the road and not being used then you can register for a Statutory Off Road Notification (SORN). This means that you won’t pay any road tax while the vehicle is ‘off the road’. If however you start to drive the vehicle while a SORN is in place then you could be fined.

If I don’t pay road tax will I be fined?

Yes, it is a legal requirement to pay road tax for all roadworthy vehicles. DVLA enforcement agents use Automatic Number Plate Recognition (ANPR) devices to spot vehicles that haven’t paid road tax. They will automatically issue a £100 penalty charge which is reduced to £50 if paid within 33 days. If it is not paid this could be deemed a criminal offence and you could receive a maximum £1,000 fine from the magistrates’ court.

How will road tax change in 2025?

In the 2022 Autumn Statement, the Chancellor introduced plans to start road taxing electric vehicles (EVs). There will be a small payment due for EVs in the first year, a standard supplement will apply from year 2 to year 6 and the additional supplement will also apply for EVs with an original list price of £40,000 or more. More detail is provided in our Electric car road tax and company car tax payable from 2025 blog.

Road tax pricing tolls
Road tolls are a form of road pricing used more frequently in other countries

Is the road tax system set to change further?

The Government has been considering proposals for a new road pricing scheme. This would see every road user paying charges based on how far a vehicle travels over a particular period. In May 2023 the Resolution Foundation suggested such a scheme should be introduced soon with drivers transitioning to use electric vehicles. This is because the current road tax rates, and 2025 plans, will lead to a shortfall in Government revenue as the number of EVs on the roads grow. The Resolution Foundation has suggested a 6p + VAT per mile charge would plug the hole in the Government’s finances. See our blog on how VED could be replaced by a ‘pay as you go’ road tax.

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