Vehicle Excise Duty – road tax changes 2026

The rate of vehicle excise duty (VED) you need to pay for motor vehicles changed in April 2026. Drivers of new petrol, diesel, and hybrid vehicles are impacted.

If you use a car or van for your small business, read on to make sure you’re prepared for the new road tax rates.

• What is Vehicle Excise Duty?
• Vehicle Excise Duty reforms – April 2026
• Road tax for electric vehicles
• How much will VED cost in 2026?
• How to pay VED
• What happens if you don’t tax your vehicle?
• Are there any exemptions for VED?

What is Vehicle Excise Duty? 

Vehicle Excise Duty (VED) is the yearly tax that you need to pay if you own a car, motorbike, van, or any other motor vehicle registered in the UK. It’s more commonly known as road tax or car tax. 

Every year, the tax increases in line with inflation. The new standard rate is £200, which applies to vehicles from the second year they were registered, but you may have to pay more or less for the first year. 

Older vehicles – those registered before 1 April 2017 – have different tax bands to more modern cars, depending on their CO2 emissions.

Vehicle Excise Duty reforms – April 2026

From 1 April 2026, the government made a number of changes to the rates of car tax. The main changes you’ll need to be aware of are:

• owners of petrol, diesel, and hybrid cars emitting more than 76g/km CO2 will see their first-year tax bill increase. This means that the most polluting vehicles could come with annual bills of up to £5,690 
• vehicles emitting 1-50 g/km of CO2 will have to pay £115 road tax in their first year
• vehicles emitting 51-75g/km of CO2 will have to pay £135 road tax in their first year

How much will VED cost in 2025? 

How much road tax you need to pay will depend on the type of vehicle you have and when you registered it. Plus if your vehicle was listed for more than £40,000, you’ll need to pay the extra “premium car tax” – adding an extra £440 to your bill. 

For electric vehicles, this threshold increased to £50,000 from 1 April 2026. This means you only pay the supplement if your EV originally cost more than £50,000.

Road tax for cars registered after April 2017

You pay an emissions-based rate for newer cars in their first year on the road. After that, you pay a standard annual rate.

Road tax for cars registered between March 2001 and 1 April 2017

As we mentioned earlier, cars registered between 1 March 2001 and 31 March 2017 are taxed slightly differently to newer ones. They’re sorted into bands for road tax every year – rather than just the first year they were registered – depending on their emissions. 

Here’s a breakdown of the new rates of tax for these vehicles after 1 April 2026.

VED rates for vans, light goods vehicles, and company cars

Electric van owners didn’t previously have to pay road tax. But you now need to pay the same annual rate as petrol and diesel light goods vehicles (£360).

The DVLA taxes double-cab pick-ups as private light goods vehicles for VED purposes. This means you’ll pay a rate based on the vehicle’s engine size.

How to pay VED

To pay road tax, you’ll need to find your reference number – either in your vehicle log book or a recent vehicle tax reminder or ‘last chance’ warning letter from DVLA. If you don’t have any of these, you can apply for a new vehicle log book. 

You can then pay VED on the government website, over the phone, or at the Post Office. You can choose to make payments monthly or annually. 

You don’t need to make any changes in response to the new VED rates. If you pay by Direct Debit, your updated car tax amount will be taken on the next payment date after 1 April. If you pay annually, you’ll be asked to pay your bill at the same time/date as before.

What happens if you don’t tax your vehicle? 

If you keep an untaxed car without registering it as ‘off road’, the DVLA will send you a Late Licensing Penalty (LLP) letter and an £80 fine. The DVLA reduces this to £40 if you pay it within 33 days.

The DVLA will then send an Out of Court Settlement (OCS) letter. You’ll need to pay a £30 fee plus one-and-a-half times the outstanding vehicle tax rate. If you don’t pay this, the DVLA could take you to magistrates court. This comes with a penalty of £1,000 or five times the amount of road tax you owe annually.

This penalty increases to £2,500 if you’re caught using or keeping an untaxed vehicle on a public road, even with a Statutory Off Road Notification (SORN) in place. If you drive without car tax, the police could fine you up to £1,000.

Are there any exemptions for road tax? 

If you use one of the vehicles below you won’t have to pay road tax, but you’ll still have to register 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

More useful guides for your small business

• What does business van insurance cover?
• What van should I buy?
• The best small vans for your business
• MOT checklist for you business vehicle