Changes to Vehicle Tax in 2024
posted 19th February 2024
Road Fund Licence, Vehicle Excise Duty (VED) and Road Tax, are all terms for the annual tax that motorists must pay on their vehicles.
In line with inflation, in April 2023 the rates were increased, and it has been confirmed by HMRC that the rates will increase again from April 2024. Given the recent high inflation levels in the UK, this could be as much as 6%.
What will it cost me to tax my vehicle?
The amount of tax you pay for your vehicle depends on when it was first registered. Changes to the way road tax is calculated is not retroactive, so the system that applied when a new car was first purchased will remain for as long as it remains on the road. However, the rate is subject to inflationary change.
A new car purchased today will be subject to the tax band system introduced in April 2017 and later revised in April 2023. A used car registered before April 2017 will be subject to the older system that was in force at that time.
The current tax system is divided into two main rates. Initially the first-year tax is calculated based on the amount of carbon dioxide emissions. From the second year onwards, the tax is calculated based on the cost of the vehicle when it was new.
The tax rates are further affected by a vehicles fuel type, be it fossil fuel, electricity or a combination of both.
1st year rates.
Based on a vehicles emissions of carbon dioxide, rates currently range from £0 to £2,605. The cost of the first years tax is usually included in a vehicles On The Road price.
Although currently electric vehicles are exempt from this first years charge, from April 2025 owners will pay the minimum amount, which is currently £10.
The current first tax payment can be found at www.gov.uk/vehicle-tax-rate-tables.
2nd year onwards.
The annual base rate for vehicle tax is currently £180 £170 for hybrid vehicles). Vehicles that cost £40,000 or over when first registered are subject to an additional £390 supplement for 5 years (after the first emissions based year). After this 5 year period, the amount will revert back to the standard £180 a year.
Fully electric cars are currently exempt from these rules, although will lose this exemption from April 2025.
Tax bands for vehicles registered 2001 to 2017
Vehicles registered from 1st March 2001 to 31st March 2017 are subject to a different tax calculation system, based entirely on Carbon Dioxide emissions. The amount of tax paid for these vehicles can be found at gov.uk/vehicle-tax-rate-tables.
Tax bands pre 2001
Vehicles registered earlier than 1st March 2001 fall into two tax bands, based on the size of their engine.
• Cars over 1,549cc: £325 a year
• Cars under 1,549cc: £200 a year
Classic Car exemption
Vehicles that are 40 years or more old (from date of registration) are exempt from tax, although owners must apply for exemption.