Vehicle Excise Duty, or "road tax"

How many vehicles is it charged on?

Battery electric cars are 5.8% of the cars on the road. They paid no vehicle excise duty until April 2025 and pay it now, which is why the number matters to the total as well as to the owner.

Figure as of 30 June 2026. Source: Department for Transport.

Vehicles declared off the road under a Statutory Off Road Notification are not taxed and not insured. They are counted separately here rather than netted off, because a vehicle can move between the two in a year.

How does it work?

Almost everyone calls it road tax. It has not been road tax since 1937, and the distinction is the single most argued-about thing about it.

What you pay depends entirely on when the car was registered. Cars registered from April 2017 pay a high first-year rate based on CO2, then a flat standard rate every year after. Cars registered between 2001 and 2017 pay a rate set by their CO2 band for life, which is why some older low-emission cars still pay nothing. Cars registered before 2001 pay by engine size.

On top of the standard rate, cars with a list price above £40,000 when new pay an expensive car supplement for five years. The threshold is higher for electric cars, but it is not indexed, so it catches more cars each year as prices rise.

Rates: GOV.UK, Vehicle tax rate tables. Checked by hand 22 September 2026.

Electric vehicles paid nothing until April 2025 and now pay the standard rate like everything else. From 2028 they will also pay a per-mile charge on top.

A three-year-old petrol car with a £45,000 list price

The supplement more than triples the bill, and it is based on the price when the car was new, not what it is worth now.

How has it changed?

How it got here, and why each change was made:

• 1888The first duty on mechanically propelled vehicles.
• 1909The Road Fund is created and vehicle duty is hypothecated to it. This is the origin of the phrase road tax, and the only period when it was true.
• 1937Churchill abolishes the Road Fund link, having argued that hypothecation gave motorists a false sense of owning the roads. Vehicle duty goes into general taxation.
• 2001Rates start to vary by CO2 emissions rather than engine size, to push buyers towards cleaner cars.
• 2017The system is redesigned: a high first-year rate by CO2, then a flat standard rate, because CO2 banding had made most new cars exempt and revenue was falling.
• 2018The National Roads Fund is announced, hypothecating English VED to the strategic road network. A partial return to the 1909 idea.
• 2025Electric vehicles start paying, ending the exemption that had helped drive their adoption.
• 2028A per-mile charge for electric vehicles is due to begin, on top of VED.

Where does the money go?

The National Roads Fund, in England only. Partly true, and more than it was. Since 2018 English VED has been allocated to the National Roads Fund, which pays for the strategic road network: motorways and major A roads managed by National Highways. But it does not fund local roads, which is where most potholes are and which councils pay for out of general funds. VED also raises more than the fund spends. And Scotland, Wales and Northern Ireland get block-grant funding rather than their own share. So "road tax pays for the roads" is closer to true than it was in 1990, and still not a fair description of what most drivers experience.

Does it change what people do?

CO2-based banding worked, arguably too well. It shifted buyers so effectively towards low-emission cars that by the mid-2010s a large share of new cars paid nothing, and the 2017 redesign was needed to stop receipts collapsing. It is a clear case of a tax achieving its behavioural aim and undermining its revenue aim at the same time.

When a tax rise stops raising money looks at the cases where the effect has been large enough to move the revenue.

What are the arguments?

Both columns are set out as their strongest case, not as a preferred answer and a strawman. See how this site handles contested questions.