Understanding the 2024-25 VED Road Tax Rates for UK Vehicles

What is car tax or VED? Why must I pay for it?

Vehicle Excise Duty (VED), known as car tax or road tax, this is a fee imposed for using a vehicle on common local public roads in the UK. It originated in the taxation of Hackney Carriages in the 17th century and was officially introduced in its current form in 1937, replacing the previous road tax system.

Historically, car taxation was managed by local authorities until 1974, when the Driver and Vehicle Licensing Centre (DVLC) was established. Later, it became the Driver and Vehicle Licensing Agency (DVLA). The iconic tax disc, introduced in 1921, was abolished in 2014.

The DVLA collects approximately £5 billion annually from VED, but contrary to popular belief, not all of this revenue is allocated to road improvements and infrastructure. Instead, VED is pooled with other tax forms, meaning the funds generated from road tax are utilized for various purposes, including education, healthcare, and road-related expenses.

The Vehicle Excise Duty (VED) rates for UK vehicles will see several changes in the 2024-25 financial year. Here’s an overview of how these updates will impact UK motorists:

1. General Increase in VED Rates: From April 1, 2024, VED rates will increase in line with the Retail Prices Index (RPI). This means most vehicles will see a slight rise in annual road tax costs to keep up with inflation.

2. Standard Rates: The standard rate for cars registered after April 1, 2017, will be £190 per year. Hybrid vehicles will receive a small discount, bringing their rate to £180 annually.

3. First-Year Rates: The first-year VED rate for new cars is based on CO2 emissions. Vehicles emitting over 255g/km of CO2 will face the highest rate, which has increased significantly in recent years. These rates are structured to encourage the purchase of low-emission vehicles.

4. Premium Car Surcharge: Cars with a list price over £40,000 will continue to incur an additional surcharge of £410 annually, applicable from the second to the sixth year of the vehicle’s life. This surcharge remains unchanged despite inflation, making it relevant to more mainstream models due to rising vehicle prices.

5. Electric Vehicles (EVs): One of the most significant changes in the VED rates is the treatment of Electric Vehicles (EVs). Currently, EVs are exempt from VED, but this exemption will end in 2025. From then, EVs will be subject to the lowest first-year rate, marking a significant shift in the tax landscape for electric cars. This change is important for those considering purchasing an EV, as it will affect their running costs in the future.

6. Older Vehicles: For cars registered before April 2017, VED rates are based on CO2 emissions, with lower emissions resulting in lower tax bands. Vehicles registered before March 2001 are taxed based on engine size.
The updates in the VED rates for the 2024-25 financial year are designed to achieve several key objectives. They aim to maintain VED receipts in real terms, ensuring that all vehicle owners contribute fairly to public finances. Additionally, they are structured to encourage the uptake of lower-emission vehicles, aligning with the government’s commitment to reducing CO2 emissions and promoting sustainable transportation.

Get more details about the road tax, check your car tax status now!

How much is my car tax in 2024?

The standard car tax rate for the 2024/25 financial year is £190. Hybrid vehicles receive a £10 discount, making their rate £180. If your vehicle’s initial list price exceeds £40,000, you are subject to the ‘premium car tax’ fee, which adds £410 to the annual Vehicle Excise Duty (VED) costs.

The annual road tax amount for cars registered before 2017 may vary. The fee depends on the vehicle’s registration year and fuel type.
Many electric vehicles are exempt from road tax, but this will not being followed in 2025 when VED charges for electric cars will be introduced. Refer to our electric car road tax guide for more detailed information on VED for electric vehicles.

What tax band is my car by reg?

To determine your car’s tax band, you’ll need the year it was first registered. You can find this information in the V5C logbook on page one. Once you have the registration year, you can identify your vehicle’s specific tax band and annual cost.

Tax categories for vehicles registered between March 2001 and April 2017

For cars registered between March 2001 and April 2017, VED road tax rates are categorized into 13 bands based on CO2 emissions. Cars emitting less than 100g/km of CO2 incur no road tax, but this will change in 2025 when such cars move from Band A to Band B.
Both petrol and diesel cars in this category generally have similar road tax rates.

Alternative-fuel cars, including hybrids, plug-in hybrids, and those using LPG, CNG, or biofuel, have a £10 reduction in VED compared to Conventional petrol or diesel vehicles.

Tax categories for vehicles registered after April 2017

As of April 1, 2017, the UK introduced a new road tax system affecting cars registered after that date. This system replaced the CO2-based VED with zero, standard, and premium bands. The change was made due to decreasing CO2 emissions, reducing revenue for the Treasury.

For cars registered after April 2017, the first-year tax is based on CO2 emissions, followed by a standard rate of £190 per year from the second year onwards. Only zero-emission vehicles are exempt from VED, while cars with a list price over £40,000 incur an additional £410 charge for the first five years of the standard rate.

Further changes are expected in 2025 when electric cars will be subject to VED for the first time. They will be charged the standard rate plus the £40,000 premium car tax fee. Additionally, electric vehicles will face the first-year showroom tax, currently set at £10 per year, which applies to cars emitting 1 to 50g/km of CO2.

Source: RAC

*Vehicles with a list price of over £40,000 when new pay an additional rate of £410 per year on top of the standard five-year rate. The 5-year time limit starts from the second year the car is registered.