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2023 Car Tax Rates: How Much Is Car Tax In 2023?

In the United Kingdom, car owners pay a fee known as Vehicle Excise Duty or VED, which contributes towards maintaining the country’s transport infrastructure. This fee, also known as road tax, is reviewed every year, and the latest Budget in March 2023 introduced new changes to road tax rates that will come into effect from the 1st of April 2023. If you’re a car owner in the UK, it is important to be aware of these changes to ensure that you are paying the correct road tax rates. In the following article, we will outline everything you need to know about the latest road tax rates, so you can be well-informed and avoid any unnecessary penalties.

Cars Registered From 2017

Starting in 2017, cars were categorised into tax bands that are determined by their carbon emissions. This classification determines how much the owner pays for the first year of ownership. When a car is brand new, the first year of road tax is structured differently. The level of pollution from the emissions of the car determines the tax band, with more polluting vehicles being charged at a higher rate to put their car on the road for the first time. The fee can be as high as £2605 for the first year.

After the first year, cars priced at over £40,000 from new will also be required to pay an additional premium tax of £370 a year in addition to the standard rate (which has increased from £355). After six years of use, the standard rate of £180 will be applied.

Diesel and petrol cars are subject to the same fixed taxation rate, which has been increased from £165 to £180 a year starting from April 2023. On the other hand, alternatively fueled cars like hybrids traditionally receive lower tax prices and were charged £155; this is also expected to rise.

For cars registered between 2001 and 2017, the road tax is calculated every year based on their carbon emissions. Cars with larger engines in the highest tax band have to pay £695 per year, while cars that emit less than 100g/km of carbon are not charged any tax. Previously, the highest tax rate in Band M was limited to £630.


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Cars Registered Before 2001

In the UK, vehicles that were manufactured before 2001 fall into two categories based on their engine size – those with engines larger than 1.5 litres, and those with engines smaller than 1.5 litres. The current road tax rate for vehicles in the lower category is £180, but this is set to increase to £200 in 2023. For vehicles in the higher category, the current rate is £295, but this will be raised to £325. It’s worth noting, however, that cars that are over 40 years old are exempt from road tax, as long as they are classified in the ‘historic tax class’. This provides a helpful incentive for owners of older vehicles to keep them on the road and in good condition without the added cost of road tax.

Electric Vehicle Tax

At present, electric cars are exempt from vehicle tax. This is due to their zero emission status, which places them in the lowest tax bracket. The original list price of the vehicle is no longer taken into account. However, as part of the UK government’s effort to reduce carbon emissions, a ban on all new petrol and diesel vehicles will come into effect in 2030. As more people switch to cleaner vehicles, there will be a shortfall in tax revenue, which will result in electric cars being taxed in the future. This would ensure that motorists continue to contribute towards road maintenance and improvement.

Road Tax Changes From 2025

Although changes to the road tax system are likely to occur again in the future, new guidelines have been recently announced for 2025. Cars that were registered between 2001 and 2017 and use petrol or diesel that fall within the lowest tax bracket A, will be moving up to Band B. The change means that owners of these vehicles will now have to pay an annual tax rate of £20, an increase from previous rates of £0. Hybrids and other alternatively fueled vehicles will also have to pay the same standard fee as petrol and diesel cars, ending any discounted rates these owners may have enjoyed. 

For electric vehicles (EVs), new fees will be introduced from 2025, based on the car’s original purchase price and age. Older EVs that were registered before 2017 will pay rates as low as £20 per year, while the ones registered after 2017 will be charged the same rate as petrol and diesel vehicles, which is currently £180. However, expensive EVs worth over £40,000 at the time they were purchased will be charged a premium rate of £370 per year, provided that the fee structure is not changed in the future.


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Tips For Road Tax

It is important to remember that even if your vehicle is exempt or free to tax, it must still be registered for road tax. It is worth noting that some vehicles that would have originally cost over £40,000 and have been registered after 2017, will be charged road tax at a higher rate for the first six years of ownership. 

When it comes to paying road tax, there are three options available: monthly, every six months, or annually. However, paying in instalments will add extra costs as interest is added on top of the annual fee. Also, it is important to know that vehicle tax is non-transferable, meaning that any tax that has already been paid for a vehicle in advance will be refunded when the vehicle is sold. If you purchase a new vehicle, as the new owner, you will need to ensure that it is taxed before taking it out on the road.


In conclusion, the new 2023 car tax rates in the United Kingdom have significant implications for car owners. With changes to electric vehicle tax, cars registered between 2001 and 2017, and vehicles registered prior to 2001, it is important for car owners to stay informed and make sure they are paying the correct road tax rates. While some cars may enjoy discounted rates initially, they still face increasing rates from 2025. By understanding the tax bands and classifications, car owners can avoid unnecessary penalties and ensure they are contributing towards Britain’s transport infrastructure. By transitioning to cleaner vehicles, we may see a shortfall of revenue, and it is essential to implement new policies that will ensure sustainable funding to maintain our United Kingdom’s road network. It is vital for car owners to comply with these changes to avoid undesirable situations and to contribute to the country’s development.


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UK Car Tax FAQs

Q. What is car tax and why do I need to pay it?

Car tax, also known as vehicle excise duty (VED), is a tax required by law in the UK for all vehicles used on public roads. The funds raised from car tax go towards the maintenance and upkeep of British roads.

Q. How are car tax rates determined?

Car tax rates are determined by various factors including vehicle emissions, the fuel type, and the date of first registration.

Q. What is the average car tax rate in the UK?

The average car tax rate in the UK varies depending on the vehicle’s emissions and fuel type. As of 2021, the average car tax rate for a petrol or diesel car emitting 131 to 150 g/km of CO2 is £170.

Q. How do I know how much car tax I need to pay?

You can check your vehicle’s car tax rate and how much you need to pay on the UK government’s website. You will need to know your vehicle’s registration number and its date of first registration.

Q. How often do I need to pay car tax in the UK?

Car tax in the UK is paid annually, with rates varying depending on the vehicle’s emissions and fuel type.

Q. What happens if I don’t pay my car tax?

If you don’t pay your car tax, you could face a fine or even have your vehicle clamped or impounded.

Q. Can I pay my car tax monthly?

Yes, you can pay your car tax monthly or annually. Monthly payments can be made via direct debit.

Q. What happens if I sell my car before the end of the annual car tax period?

If you sell your car before the end of the annual car tax period, you can claim a refund on the remaining car tax period from the DVLA.

Q. Is car tax affected by the age of my car?

Car tax rates in the UK are affected by the date of first registration, with vehicles registered after 1 April 2017 subject to different rates based on their emissions.

Q. Are there any exemptions for disabled drivers?

Yes, disabled drivers in the UK may be eligible for a tax exemption or reduction, depending on the nature of their disability and vehicle.

Q. What happens if I upgrade my car midway through the annual car tax period?

If you upgrade your car midway through the annual car tax period, you will need to register the new vehicle and pay the appropriate car tax rate for that vehicle.

Q. How can I reduce my car tax bill in the UK?

To reduce your car tax bill in the UK, consider purchasing an electric or hybrid vehicle with low emissions or a vehicle that qualifies for a lower tax bracket due to its date of first registration.