UK Road Tax Overhaul: 2026 VED Bands Bring Significant Increases for Drivers
Motorists in the United Kingdom are being urged to prepare for substantial road tax hikes set to take effect from April 2026, with Vehicle Excise Duty (VED) rates undergoing a major adjustment across 13 bands. The changes, tied to the Retail Price Index update from the 2025 Autumn Budget, will see annual payments rise by amounts varying from a modest £5 to a staggering £5,690, depending on vehicle type and emissions.
Standard Rate Rises and First-Year Tax Surges
For the majority of petrol and diesel car owners, the standard annual VED rate will increase by £5, moving from £195 to £200. This applies to most vehicles registered after April 2017, representing a direct response to falling CO2 emissions that had previously reduced Treasury revenue. However, the financial impact escalates sharply for those purchasing brand-new vehicles or operating older, high-pollution models.
First-year car tax rates for new petrol and diesel cars are soaring significantly, with the highest-emitting vehicles facing an additional £200 charge. Specifically, the first-year tax for the most polluting models will jump from £5,490 to an eye-watering £5,690, placing a heavy burden on buyers of luxury or performance cars.
Detailed Breakdown of 2026-2027 Car Tax Rates
The new VED bands for vehicles registered between March 1, 2001, and April 1, 2017, include several key adjustments:
- Bands up to 120g/km remain unchanged at £20 or £35.
- Rises begin at 121-130g/km, increasing from £165 to £170.
- Higher bands see progressive hikes, such as 131-140g/km moving from £195 to £200, and over 255g/km climbing from £750 to £790.
For cars registered on or after April 1, 2017, the standard rate applies, with vehicles exceeding a list price of £40,000 at registration required to pay an additional rate for five years from the second licence. This premium car supplement, currently £425, adds to the standard VED, reflecting ongoing efforts to balance environmental goals with revenue generation.
Electric Vehicles and New Mileage Tax
In a significant shift, electric vehicles (EVs) are now subject to VED for the first time since April 2025, ending their previous exemption. New EVs face the standard rate and the expensive car supplement, with the latter applying if the list price surpasses £50,000. Additionally, EVs are liable for the first-year showroom tax, which covers vehicles with CO2 emissions of 1 to 50g/km.
Looking ahead, from April 2028, electric and hybrid vehicles will be hit with a new 'mileage tax' designed to compensate for the lack of fuel duty payments. Drivers will pay approximately 3p per mile for battery electric cars and £0.015p per mile for plug-in hybrids, with this levy increasing annually in line with the Consumer Price Index. This policy, estimated to add around £300 for every 10,000 miles driven in an EV, aims to fund road maintenance but has raised concerns about increasing costs for high-mileage drivers.
Exemptions and Special Cases
Despite the widespread increases, certain exemptions remain in place. Vehicles over 40 years old continue to qualify as 'historic vehicles' and pay no VED, with the rule unchanged for 2026. Similarly, road tax exemptions for disabled motorists are unaffected, provided they meet specific criteria such as using a mobility scooter or receiving higher-rate Disability Living Allowance.
Other tax-exempt categories include:
- Drivers with disabilities: Eligible individuals can claim free VED if they use mobility aids or receive certain benefits.
- Historic cars: Those manufactured more than four decades ago can be classified as tax-exempt through a Post Office process.
- SORN cars: Vehicles declared off-road with a Statutory Off Road Notification do not require VED payments, with refunds available for pre-paid tax.
Industry experts, like John Cassidy of Close Brothers Motor Finance, warn that these changes, particularly the mileage tax for EVs, could make electric ownership more expensive than traditional options, especially amid rising energy bills and public charging costs. As the 2026 deadline approaches, drivers are advised to review their vehicle's emissions and registration date to anticipate the full financial impact of the revised VED bands.
