Drivers of cars registered between 2017 and 2025 face a new Vehicle Excise Duty (VED) charge of £560 under the updated tax bands confirmed by Labour Chancellor Rachel Reeves. This increased charge applies to vehicles emitting 131 to 150 grams of CO₂ per kilometre in their first year on the road.
From year two onward, these vehicles will revert to paying the standard VED rate of £200 annually, up slightly from £195 in 2025/26. Cars registered after April 1, 2017, remain subject to a first-year “showroom tax” calculated based on CO₂ emissions, with subsequent years billed at standard rates.
For new cars with a list price exceeding £40,000, an additional annual supplement of £440 applies for the first five years. This threshold rises to £50,000 for zero-emission electric vehicles starting April 1, 2026, meaning only more expensive EVs will incur the extra charge.
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Zero-emission cars registered from April 1, 2026, are charged £10 in their first year and then the standard £200 yearly rate thereafter. Most petrol and diesel vehicles pay the £200 standard rate after their initial registration year.
Drivers are reminded by Confused.com that valid car insurance and MOT certificates are required to tax a vehicle. Failure to tax can result in an £80 fine, reducible to £40 if paid promptly, or penalties up to £1,000 if caught driving untaxed. The DVLA also has the authority to clamp untaxed vehicles.
Moreover, driving without valid insurance invokes even tougher penalties. Motorists selling their vehicles and cancelling insurance may be eligible for a partial tax refund based on the remaining months of paid tax.