Drivers stung with £200 automobile tax within the newest cost-of-motoring blow on prime of hovering gasoline costs

Drivers will be fully aware petrol prices are rocketing thanks to the Iran conflict – but tax changes coming in very soon may have passed them by. 

The DVLA has confirmed new Vehicle Excise Duty (VED) rates from 1 April 2026, and the standard rate of tax is rising by £5 to £200 a year.

And for owners of relatively new, pricey petrol and diesel cars, the annual tax outgoing will rise to £640 with the Government also hiking the Expensive Car Supplement (ECS) levied on motors with an original list price of £40,000 or more.

With road tax typically increasing with inflation, the standard VED rate’s 2.5 per cent jump is less than the current Retail Price Index, which shows inflation in the UK running at 3.2 per cent.

However, the ECS sting on pricier models – up from £425 to £440 – is slighter above the inflation rate at 3.5 per cent.

With the RAC warning that fuel prices will continue to surge in the coming days and weeks in what is becoming an incredibly ‘bleak’ period for motorists, who too are forking out higher repair bills due to spiralling parts and labour costs, the rise in road tax will only increase the strain on the nation’s financially-pummelled drivers. 

The £200 flat standard rate of tax is levied on cars first registered after 1 April 2017.

But the ECS – a surcharge only applied to vehicles with an official list price of over £40,000 and is paid annually on top of the standard VED rate between years two and five of ownership – means around a third of drivers of cars in this age bracket will be handing over £640 to the Treasury this year.

Records show that over 426,000 drivers in the UK were subjected to the ECS in the 2024–25 financial year, with data suggesting the surcharge applies to 31 per cent of motors within the applicable age range.

Higher rates will also sting new models registered after 1 April, which unlike the flat standard rate are calculated on the CO2 emissions output of the vehicle.

While new EVs are hit with the same £10 ‘showroom tax’ for the first year, all other cars will be subject to a tax sting.

For cleaner models producing less than 100g/km CO2, the increase is between £5 and £15.

But for motors with CO2 emissions of 150g/km to 254g/km, the year-on-year increase is between £50 and £170. 

And for the few who purchase gas-guzzling motors putting out carbon dioxide at more than 255 grams per kilometre, there is a £200 hike from £5,490 to an eye-watering £5,690.

To put that into perspective, the cost of first-year VED for high-polluting cars like the Audi RS6, Ford Mustang or V8 Porsche Cayenne is almost half the price of the cheapest new car in Britain, the £14,715 Dacia Sandero. 

For older motors – those first entering the road between 2001 and April 2017 – the standard rate taxation, which is also based on CO2 emissions, is also rising.

And there are some sizable increases for owners of these ageing motors too.

While electric cars as well as low-emission hybrid, petrol and diesel models putting out less than 110g/km CO2 will see no increase and only need to cough up £20 a year, those with higher polluting models will be clobbered by higher costs.

For drivers of the most-emitting vehicles – those producing over 255g/km CO2 – the annual road tax bill is upped from £760 to £790.

But it’s not entirely bad news all round…

From 1 April, the Government’s will impose its higher ECS threshold for fully electric cars, with only EVs with a retail price in excess of £50,000 hit with the £440 surcharge.

Ministers agreed to increase the ECS ceiling for EVs by £10k in consideration of their premium retail prices over equivalent petrol and hybrid alternatives in a backtrack over concerns that the supplement could further reduce demand for greener cars.

It comes 12 months after Labour’s controversial decision to levy VED on electric cars for the first time, and less than six months since Chancellor Rachel Reeves announced she will impose a 3p-a-mile tax on EVs from April 2028 – and a 1.5p per mile charge on drivers of plug-in hybrids.  

Next month’s increase comes in tandem with skyrocketing pump prices triggered by the conflict between the US and Israel alliance and Iran.

According to the RAC, since the end of 28 February – the date the first attacks took place – and 20 March, the average price of a litre of petrol has jumped by almost 12p from 132.8p to 144.5, seeing the cost of filling the tank of an average family car increasing by more than £6.50.

Diesel has accelerated twice as fast, rocketing from 142.4p when the US first opened conflict on Iran to 166.2p on 20 March, which is up nearly 24p per litre in just three weeks – and costing motorists an extra £13 per forecourt fill up.

Simon Williams, the RAC’s policy spokesman, said the rising cost of fuel is ‘really starting to hurt drivers who do a lot of miles, and especially for those with diesel vehicles’.

He added: ‘The oil price has been consistently above the $100 a barrel mark this week, so unfortunately further rises look all but inevitable going into next week. 

‘The average price of a litre of unleaded is likely to reach 150p, and diesel possibly 180p, by Easter. 

‘With many people heavily dependent on the car, the pressure on household budgets is beginning to intensify.’

The escalating cost of fuel has already sparked fresh calls for Reeves to postpone her increase to fuel duties paid on petrol and diesel from September.

In her August Budget statement, the Chancellor confirmed that from September she will gradually wipe out the ‘temporary’ 5p cut to fuel duty imposed by former Chancellor Rishi Sunak in 2022, who slashed the taxation on the back of rising pump prices caused by Russia’s invasion of Ukraine.

When the cut was introduced, petrol was at 167p-a-litre and diesel at 180p.

With Brent Crude trading above $100-a-barrel for a week and there no clear sign of the conflict in the Middle East easing, there is every chance that pump prices could return to that level within a matter of days.

Motorists have also been warned to expect higher repair bills in 2026, due to a combination of factors including higher parts prices, the cost of labour increasing and a shortage of mechanics in the UK.