New HMRC Car Tax Bands Increase Costs for Petrol and Diesel Drivers

New HMRC Car Tax Bands Increase Costs for Petrol and Diesel Drivers

New HMRC car tax bands have come into effect this April, bringing unwelcome increases for drivers of petrol and diesel vehicles across the UK. The updated Vehicle Excise Duty (VED) rates, which took effect from April 1, 2026, mean motorists have been paying higher fees for the past two weeks, with inflation-linked adjustments driving up costs annually.

Detailed Breakdown of the 2026 VED Increases

For cars registered after 2017, standard VED rates have risen from £195 to £200 in 2026. First-year rates are particularly affected, with owners of brand-new highly polluting models facing a £200 increase, as bills jump from £5,490 to £5,690. HMRC has confirmed that vehicles emitting between 226 and 255g/km of CO2 will see significant hikes, with prices climbing from £4,680 to £4,850 per year.

Road users are also warned that cars registered between 2001 and 2017 face rises. Vehicles emitting over 255g/km of CO2 will pay £790 to use the road in 2026/27, up from the previous £760 fee. Cars emitting between 225 and 255g/km of CO2 are next, with fees increasing by £25 from £735 to £760 per year.

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Tax Band-Specific Increases and Exemptions

Drivers in car tax bands H and I will see fees rise by £15, followed by a £10 increase for vehicles in bands G and F, according to HMRC. Cars falling into tax bands C and D will pay £5 more in 2026. However, there are no increases for lower polluting cars in bands A and B, providing some relief for environmentally conscious motorists.

Budget documents from the Labour Party government explained: “As announced at Budget 2025, the government will introduce legislation in Finance Bill 2025-26 to uprate Vehicle Excise Duty rates for cars, vans and motorcycles in line with the Retail Price Index (RPI) for 2026 to 2027. This will take effect from 1 April 2026.”

This annual adjustment ensures that VED fees keep pace with inflation, but it places additional financial pressure on drivers, especially those with older or more polluting vehicles. The changes highlight the ongoing shift towards incentivising cleaner transportation options while generating revenue for public services.