With the nation's drivers facing increasing fuel prices on the back of the Iran War, a car tax hike taking effect today (1 April) will be another burden on household finances.
With motorists bearing the brunt of Donald Trump's war in the Middle East with escalating costs at the pumps, and the Government pocketing increasing revenue through road fuel taxes, the Treasury is set for another windfall as the Chancellor inflates Vehicle Excise Duty (VED) rates for the next 12 months.
Most drivers will see their annual costs rise to £200 a year, though some face paying astronomical levies of up to £5,690.
One major change to VED rules comes into force on 1 April that benefits only electric vehicles, with Rachel Reeves increasing the Expensive Car Supplement (ECS) threshold for zero-emission cars to encourage more drivers to switching to EVs with the carrot of evading the £440-a-year premium tax.
Want to know exactly how the VED hike impacts you?
This is Money has detailed all the changes based on the age of your car so you can see how much you will pay compared to last year.
Most drivers will see their annual costs rise to £200 a year thanks to increases in VED introduced by the Chancellor for 2026-27. Some face paying taxation up to £5,690 this year
I'M BUYING A NEW CAR AFTER 1 APRIL 2026
When motorists buy a new car, they pay a first-year tax rate - commonly known as a 'showroom tax' - based on the vehicle's quoted CO2 emissions, with costs increasing for higher polluters.
This showroom tax is included in the 'on the road' - or OTR - price when customers order a new car, which is also inclusive of the registration and delivery cost.
Last year saw a monumental shake-up of showroom tax, with Reeves doubling rates in a bid to encourage drivers to ditch petrol and diesel cars and instead embrace EVs.
Fortunately for new car buyers, the rates aren't doubling again for 2026-27, with prices increasing in-line with RPI inflation.
A Toyota Yaris hybrid, one of the greenest superminis on the market with emissions as low as 91g/km CO2 for the cheapest £24k example, costs £365 to tax in the first year
Even families who buy an entry (£30,615) Nissan Qashqai with a relatively frugal 1.3-litre mild hybrid petrol engine get stung. Its 142g/km CO2 outputs means a showroom VED cost of £560
While showroom tax on EVs remains incredibly low at just £10, anyone buying a car with a combustion engine - even hybrids - will incur a minimum increase of £5 to £20 compared to last year.
Even low-emitting plug-in hybrids putting out less than 50g/km CO2 incur a showroom tax of £115.
More sizable increases in costs come for cars with emissions in excess of 151g/km CO2.
New models emitting up to 170g/km are subject to a £50 hike in showroom tax, with the first-year VED rate rising to an eye-watering £1,410.
And more significant costs come higher up the emissions-based bands, increasing to £2,270 (up £80) for 171 to 190g/km C02 emitters, £3,420 (up £120) for models emitting between 191 and 225g/km, and a whopping 4,850 (up £170) for cars with outputs of 226 to 225g/km CO2.
But the biggest sting on new cars comes for those with emissions higher than 255g/km.
The showroom tax rate has been upped by £200 to a staggering £5,690.
A mild-hybrid diesel Range Rover that emits 194g/km CO2 now costs £3,420 in showroom tax
The latest Ford Mustang - Britain's most affordable V8 costing just over £55k - is in the highest car tax band, meaning it is one of the models to incur a showroom tax sting of £5,690
VED FIRST YEAR 'SHOWROOM TAX' RATES FOR CARS REGISTERED AFTER 1 APRIL 2026 Emissions (g/km) CO2 First-year VED for new petrol, diesel, hybrid and electric cars Increase 0 £10 £0 1-50 £115 £5 51-75 £135 £5 76-90 £280 £10 91-100 £365 £15 101-110 £405 £15 111-130 £455 £15 131-150 £560 £20 151-170 £1,410 £50 171-190 £2,270 £80 191-225 £3,420 £120 226-255 £4,850 £170 Over 255 £5,690 £200
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And buyers also need to be wary of the Expensive Car Supplement - a premium tax introduced in 2017 particularly targeting luxury SUVs.
While the ECS is not levied until the second year of registration, it must be paid for five concurring years, making it a sizable sting.
Whether you need to pay it or not depends solely on the 'list price' of your new car rather than the price you actually paid after you struck a deal with a showroom salesman or woman.
For petrol, diesel and hybrid models, the list price threshold to incur the ECS is £40,000, but for EVs this has been upped to £50,000 from 1 April 2026.
Currently, just 23 EVs are on sale below £50,000, according to analysis.
The ECS is £440 - up from £425 - and is levied on top of the standard rate of VED, which is £200.
It means owners of pricier cars will be hit with an annual tax bill of £640.
MY CAR WAS REGISTERED BETWEEN 1 APRIL 2017 AND 31 MARCH 2026
VED STANDARD RATES PAID FROM SECOND YEAR ONWARDS FOR CARS REGISTERED BETWEEN 1 APRIL 2017 TO 31 MARCH 2026 Fuel type Standard tax rate for cars costing less than £40,000 Increase Standard tax rate for cars costing more than £40,000 Increase Petrol, diesel, hybrid and electric cars £200 £5 £640 £20 *petrol, diesel and hybrid models with a 'list price' (the published price before any discounts) of more than £40,000 - and EVs with a list price over £50,000 - to pay an additional premium tax of £440 for the first 5 years of the standard rate
If you own a car that was first registered between 1 April 2017 to 31 March 2026, the standard rate of car tax, which is paid from the car's second year onwards, has also increased.
This has been upped in-line with RPI from £195 to £200 a year across every fuel type - including hybrid and electric cars.
Petrol, diesel and hybrid cars dating back to 2020 with an RRP over £40,000 will be pay the expensive car supplement of £440 this year.
The higher £50,000 ECS threshold for EVs introduced by the Chancellor is retrospective, so any electric car with a retail price of £49,999 or less purchased after 1 April 2025 will avoid the £440-a-year premium.
The ECS is levied on top of the £200 standard rate for five years from the second year of registration to the sixth, taking the annual outlay to £640 irrelevant of if it produces low CO2 or extremely high levels of carbon dioxide.
For those who bought a new £40,000 petrol or diesel car - or £50k-plus EV - in March 2025 and plan to keep it for six years, they would effectively fork out at least £3,200 on VED alone between now and 2030.
MY CAR WAS REGISTERED BETWEEN 1 MARCH 2001 AND 31 MARCH 2017
VED FOR CARS REGISTERED BETWEEN 1 MARCH 2001 AND 31 MARCH 2017 VED Band CO2 emissions (g/km) Standard tax rate for petrol, diesel, hybrid and electric cars Increase A Up to 100 £20 £0 B 101-110 £20 £0 C 111-120 £35 £0 D 121-130 £170 £5 E 131-140 £200 £5 F 141-150 £225 £10 G 151-165 £275 £10 H 166-175 £325 £10 I 176-185 £360 £15 J 186-200 £410 £15 K* 201-225 £445 £15 L 226-255 £760 £25 M Over 255 £790 £30 *Includes cars emitting over 225 g/km registered before March 23, 2006
For older petrol and diesel cars registered between March 2001 and March 2017, VED continues to be classified by lettered bands (from A to M) based on CO2 emission outputs.
Owners or older electric cars registered over nine years ago still only incur a £20-a-year VED rate - as will ultra-low-emission hybrid, petrol and diesel models emitting less than 110g/km CO2.
For all other vehicles, an RPI increase will impact those emitting over 121g/km.
Annual VED costs will rise between £5 and £30 for these motors.
It means the most polluting models with CO2 emissions over 255g/km will be forced to splash out £790 annually on car tax.
MY CAR WAS REGISTERED BEFORE 1 MARCH 2001
VED RATES FOR CARS REGISTERED BEFORE 1 MARCH 2001 Engine size Standard rate* for petrol and diesel cars Increase Up to 1549cc £230 £10 Over 1549cc £375 £15
If you own a car that's more than 25 years old - registered before 1 March 2001 - you will also need to pay more in car tax this year.
VED for cars this old is split into just two bands based on engine size - up to 1.55 litres and over 1.55 litres.
For those in the lower group, the rise is £10 a year, up from £220 to £230.
For the larger engine capacities, ministers have hit them with a £15 increase, rising from £360 to £375 from 1 April 2026.
MY CAR IS OVER 40 YEARS OLD
Under VED rules, any car that was registered over 40 years ago is no longer hit with car tax.
That means all cars registered before April 1986 is already eligible for 'historical vehicle taxation' exemption.
However, it is important to note that it is a vehicle keeper's responsibility to apply to the DVLA for a vehicle tax exemption so they can issue an updated log book to clarify that the car is eligible for charge-free historic vehicle tax.
You can find how to apply for historic vehicle tax on the Gov.uk site.
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