UK car tax 2025: everything you need to know about VED

One of the most important taxes you must be aware of if you want to drive a car in the UK is vehicle excise duty (VED).

VED is an annual tax paid by all drivers who drive or park their vehicles on public roads. So if you own a car, chances are you’re required to pay it. 

While VED has remained relatively unchanged in principle since its inception in 2001, some big changes have come into effect in 2025 to bring it more up to date. This includes significant changes to electric cars, buying and selling cars and rate increases.

But what exactly is VED? We’ve gathered all the information you need to know to make sense of it all right here. Read on to find out what VED is, which vehicles it covers and how you’re supposed to pay it.

What is VED and how is it calculated?

VED is a tax paid annually by drivers of cars, motorcycles, light goods vehicles and heavy goods vehicles that are driven or parked on public roads.

The tax covers the whole of the UK (that’s England, Wales, Scotland and Northern Ireland). 

VED was introduced in its current form in 2001 as part of what the government claimed was a push to reduce the amount of pollutants released into the atmosphere. 

Despite often being referred to as ‘road tax’, VED isn't directly used for funding road projects. True road tax was abolished in the 1930s.

According to the House of Commons library, VED brought in £7.4 billion in 2022/23. This figure is predicted to rise to £9.4bn by 2027/28. 

Further changes came in 2020 to increase the appeal of EV ownership. VED was uprated in line with the retail prices index (RPI) for cars, vans, motorcycles and motorcycle trade licences and switched from using the old NEDC emissions testing regime to the current WLTP one.

Changes to VED from April 2025

The VED system received some significant changes in April 2025, with the biggest adjustments applied to EVs. 

EVs were exempt from VED, but no longer. New EVs are now required to pay a first-year rate of £10 and then the standard rate of £195 from the second tax payment onwards. 

Zero-emissions or low-emissions cars registered between 1 April 2017 and 31 March 2025 are also priced at the standard rate of £195 to match all other cars on the road. 

New EVs registered on or after 1 April 2025 with a list price of over £40,000 are also required to pay the Expensive Car Supplement (ECS) on top of the £195 standard VED rate. This applies every year for the first five years of ownership. 

There are some changes to hybrids, too. The first-year rate of cars that officially emit 1-50g/km of CO2 – mostly plug-in hybrids – has risen from £10 to £110. The rate for cars that emit 51-75g/km of CO2 has risen from £30 to £135. 

How is vehicle excise duty calculated? 

Cars registered from 1 March 2001 to 31 March 2017 are taxed based on their CO2 emissions. 

All cars registered on or after 1 April 2017 incur the same flat rate from the second year and beyond.

Cars with a list price of more than £40,000 also incur the Expensive Car Supplement.

For cars registered before 1 March 2001, the engine size in cubic centimetres (cc) is what’s important. Cars with engines equal to or smaller in capacity than 1549cc (roughly equivalent to 1.5 litres) cost £170 a year, assuming you pay up front for 12 months. Meanwhile, cars with engines larger than 1549cc cost £280 a year.

Tax bands for cars registered from April 2017

In April 2017, the government introduced a new method of taxing certain vehicles, replacing the traditional system, based on CO2, with three new tax bands. These bands are zero, standard and premium. 

Vehicles registered from April 2017 are still required to pay the first-year figure based on their tax emissions (see table below). From the second year onwards, you will pay a standard rate of £195 per year.

New cars with a value (list price) of more than £40,000 land in the premium car tax band from years two to six of registration. You will need to pay £425 per year on top of the £195 standard rate for five years, starting from the second year the car is registered. 

See the table below for full figures for cars registered from April 2017 onwards.

Tax bands for cars registered from March 2001 and before April 2017

There are 13 bands for cars registered after March 2001 and before April 2017. These are labelled A to M and are based on the emissions output of the vehicle. 

Low-emission cars - those that produce less than 100g/km - will now be charged £20 a year for VED, whereas they were previously exempt. 

Read the table below to see how much tax you’ll pay for cars registered from March 2001 to April 2017. 

Is my car exempt from VED?

Some cars are exempt from VED.

Historic vehicles - that’s cars made before 1 January 1983 - are also not required to pay VED, so luckily your Ferrari 250 GTO is safe to drive on the road without further pennies. d

Disabled passenger vehicles also don't have to pay VED. You can also claim a disability exemption if you’re disabled and you drive your car, but this can only be used on one vehicle at a time. 

VED also doesn't apply to mobility vehicles and powered wheelchairs, so long as they have a maximum speed of 8mph on the road and are limited to 4mph on pavements. 

Outside of standard cars, vehicles that are used for agriculture, horticulture and forestry are also exempt. This includes tractors, light agricultural vehicles and ‘limited-use vehicles'. 

Steam vehicles are also exempt – great news for the Doble Model E Owners' Club.

If you own a car but don’t drive it on public roads, you’re also exempt, although you will have to declare it to the DVLA with a Statutory Off Road Notification (SORN).

Be aware that if you don’t let the DVLA know that you want the car registered as off the roads, you will be liable for road tax even if the car doesn’t move.

Conversely, if you want to take the vehicle back onto public roads, you will need to pay the appropriate amount of VED before you do.

How do I pay for VED?

You can pay your VED in a variety of ways.

To pay online, click here to access the official UK government website. You will need either a credit or debit card, plus one or more of the following documents to hand: 

• The V11 reminder letter that was sent to you when your existing tax was running out
• The car’s V5C registration document, which must be in your name
• The V5C/2 new keeper supplement if you’ve just bought the car
• The ‘last chance’ warning letter sent to you if you’re about to end up on the wrong side of the law for not either paying or declaring a SORN

If you don’t want to pay online, you can pay over the phone by calling 0300 123 4321. Be warned, though, that this line isn't free. You can read about the charges here. 

You can also pay at any post office that can process vehicle tax. You will need to bring one of the following:

• The V11 reminder letter that was sent to you when your existing tax was running out
• The car’s V5C registration document, which must be in your name
• The V5C/2 new keeper supplement if you’ve just bought the car

You may also need your MOT test certificate, valid for the start of the new tax period, and a valid Reduced Pollution Certificate if the vehicle has been modified to cut its emissions.

In Northern Ireland, you will need to bring your insurance certificate or cover note.

It’s important to note that the exact amount due can vary slightly, depending on whether you pay for six months or 12 months and whether you pay all at once or in instalments.

You can see a full breakdown of the charges by going to the DVLA website.

Do I need to display a tax disk?

You no longer need to wait for a tax disc to be sent for display in your vehicle’s window, as the tax disc system was abolished in 2014. 

However, it’s important to note that VED no longer transfers to a new owner when you sell or buy a car. The new owner will need to tax the car afresh before they drive the car.