UK Drivers Face Sharp Car Tax Hikes In 2026

Millions of UK motorists are bracing for a significant shake-up to car tax rules, as sweeping changes to Vehicle Excise Duty (VED) rates are set to take effect from April 1, 2026. The reforms, which impact both new and existing vehicles, are expected to hit petrol and diesel car owners the hardest, while also introducing new rules for electric vehicles (EVs). According to the RAC, the upcoming changes are part of the Labour government's annual adjustments, which align car tax rates with inflation each year and aim to incentivize cleaner, greener motoring.

For many, the most eye-catching aspect is the dramatic increase in first-year VED charges for high-emission cars. As reported by Car Dealer Magazine, a total of 59 vehicles—including models from household names like Ford, BMW, Mercedes, Toyota, Porsche, Lotus, Lamborghini, and McLaren—will face a first-year VED bill of £5,690. This is a £200 jump from the previous year, following a substantial £2,745 increase that took place in April 2025. The government’s intent is clear: encourage drivers to opt for electric vehicles by widening the tax gap between polluting cars and their zero-emission counterparts.

Chancellor Rachel Reeves, unveiling the measure in her Budget address, stated, "To help drive the transition to electric vehicles the government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars." The move is part of a broader push to reduce carbon emissions and accelerate the shift to electric vehicles across the UK.

The first-year VED charges are determined by a car's CO2 emissions at the point of registration. At the top end, vehicles emitting over 255g/km of CO2 will pay the highest charge—£5,690 for the first year from April 2026. Cars emitting between 226 and 255g/km will see their first-year bill rise to £4,850, up from £4,680. Even vehicles with more modest emissions will pay more: cars in the 1-50g/km bracket will see their rate climb from £110 to £115, while those emitting 131-150g/km will pay £560, up from £540. After the first year, most drivers will revert to the standard VED rate, which is expected to rise from £195 to £200 in 2026 for newer vehicles, according to the RAC.

Owners of older vehicles aren’t spared. For cars registered between March 2001 and April 2017, VED is split across 13 bands, with fees increasing by £10 to £25 depending on emissions. For example, Band M vehicles (over 255g/km) will pay £790, up from £760. Cars in Bands F, G, and H will see a £10 hike. Even those with vehicles registered before 2001 will feel the pinch: cars with engines up to 1,549cc will pay £230 (up from £220), while larger engines will see fees rise from £360 to £375. These changes, as detailed by Pete Barden, are designed to discourage the use of high-polluting cars and encourage the uptake of cleaner alternatives.

But what about electric vehicle owners? The government has adjusted the Expensive Car Supplement (also known as the luxury car tax), raising the threshold for EVs from £40,000 to £50,000 for vehicles registered from April 1, 2025, onwards. This means that electric cars first registered after this date and costing less than £50,000 will be exempt from the £425 annual luxury car tax, a fee that otherwise brings the total yearly VED up to £620. For petrol and diesel cars, the threshold remains at £40,000, and the surcharge applies for years two through six of ownership, adding up to £2,125 over five years.

The list of cars affected by these changes is extensive. According to Car Dealer Magazine, models facing the new top-tier VED include the Audi RS6, Lamborghini Huracan, Ford Mustang, BMW M8, Mercedes-Benz G63, and Rolls-Royce Ghost, among many others. The initial year’s tax liability for these vehicles is calculated based on their CO2 output, with the aim of penalizing the most polluting models and nudging consumers toward greener options. For reference, EVs currently pay a token £10 for their first year’s VED, a figure that remains unchanged for now.

Looking further ahead, the government is preparing to introduce a new distance-based levy for electric and plug-in hybrid vehicles from April 2028. This measure is designed to compensate for the loss of fuel duty revenue as more drivers switch to electric. Battery EVs will be charged 3p per mile, while plug-in hybrids will pay 1.5p per mile. The rate, which is expected to add around £300 for every 10,000 miles covered in an electric vehicle, will rise annually in line with the Consumer Price Index. John Cassidy, sales managing director at Close Brothers Motor Finance, warned, "A pay-by-mile scheme for electric vehicles risks increasing costs for many drivers, particularly those who rely on their cars for higher annual mileage. With energy bills rising and public charging becoming more expensive, motorists will fear that EV ownership could end up being significantly more expensive than traditional ownership."

Not all changes are unwelcome. The longstanding 40-year classic car tax exemption remains in place, meaning vehicles manufactured over four decades ago continue to attract zero VED charges. Road tax exemptions for disabled motorists are also untouched, ensuring those who qualify continue to receive full relief from these increases.

The reforms have sparked debate among motorists, industry experts, and advocacy groups. Some argue that the higher charges for polluting vehicles are necessary to meet the UK’s climate goals and improve air quality, while others worry about the financial strain on everyday drivers—especially older motorists and those in rural areas with limited access to public transport or charging infrastructure. The Express highlighted concerns from older drivers, including those over 70, who will be affected by the new car tax charges starting April 2026. As one headline put it, "Rachel Reeves just hit over 70s round the face - she hates pensioners," reflecting the frustration felt by some pensioners facing higher costs.

For those behind the wheel of a cherished older model or simply a dependable run-around, the exact amount you’ll pay depends on your car’s registration year, fuel type, and tailpipe emissions. The government’s message is unmistakable: the cleaner your car, the less you’ll pay. But with new distance-based levies on the horizon and rising annual charges, the cost of motoring in the UK is set to climb—regardless of what you drive.

As the April 2026 deadline approaches, drivers are advised to review their vehicle’s emissions and registration details, consider the long-term costs of ownership, and keep a close eye on further announcements from the Treasury. The road ahead may be bumpier for some, but for those willing to embrace change, there could be savings—and a cleaner environment—waiting just around the corner.