There are several taxes you need to know about to legally drive your car. One of the most important is vehicle excise duty, often abbreviated to ‘VED’.
Having so many taxes can be confusing, so we’ve gathered all the information you need to know to make sense of it all right here.
So: read on to find out what vehicle excise duty is, which vehicles it covers and how you’re supposed to pay.
What is vehicle excise duty (VED)?
Vehicle excise duty is a tax paid annually by drivers of vehicles that are used (or parked) on public roads. The tax covers the whole of the United Kingdom (that’s England, Wales, Scotland and Northern Ireland).
The tax covers cars, light goods vehicles, heavy goods vehicles and motorcycles, and was introduced in its current form in 2001 as part of a push to reduce pollutants being released into the atmosphere.
Despite often being referred to as ‘ road tax’, VED isn’t a tax on the road. it’s on the vehicles that use it. Road tax was abolished in the 1930s and the cost of maintaining the UK’s roads is currently covered by general taxation, not specifically VED.
While many of us aren’t a fan of taxes, VED brings in significant money for the government. According to the House of Commons library, the tax brought in £7.4 billion in 2022/23. This figure is predicted to rise to £9.4 billion by 2027/28.
As of 2015’s budget, which was introduced by then-chancellor George Osborne and implemented in 2020 by current prime minister Rishi Sunak, all money raised through VED goes back into maintaining the upkeep of the UK road system.
Further changes came in 2020, which were brought in to increase the appeal of electric vehicle ownership. VED was uprated in line with the retail prices index (RPI) for cars, vans, motorcycles and motorcycle trade licences, and switched from using the NEDC emissions scale to the WLTP system to establish tax bands. You can see where your car might fall in the table further down the page.
How is vehicle excise duty calculated?
Since 1999, VED is calculated according to the CO2 output of your vehicle. Vehicles emitting more pollutants cost more to tax, as part of efforts to persuade drivers to consider buying cleaner vehicles.
Cars registered from 1 March 2001 to 31 March 2017 are taxed based on their CO2 emissions. Cars registered on or after 1 April 2017 pay a first-year figure according to its emissions. This will, of course, be different for every car.
For cars registered before 1 March 2001, then the engine size in cubic centimetres (cc) is what’s important. Cars with engines equal to or smaller in capacity than 1549cc (roughly equivalent to 1.5 litres) cost £170 a year, assuming they pay up front for 12 months. Meanwhile, cars with engines larger than 1549cc cost £280 a year.