Car running costs explained

What the Government sets, what it does not, and how to keep the total down.

The short answer

Running a car costs much more than fuel. The fixed bills are vehicle tax, insurance, the yearly MOT and servicing, and the running costs are fuel and wear. The official figures below cover the parts the Government sets: vehicle tax, the MOT fee and the approved mileage rates. Insurance, fuel prices and servicing depend on you, your car and where you live, so we give no figure for them.

Vehicle tax (VED)

For cars first registered on or after 1 April 2017, GOV.UK lists the standard rate, from the second time the car is taxed, at £200 for a single 12-month payment or £210 in total if you pay by 12 monthly Direct Debits. Paying monthly therefore costs £10 more over the year.

First-year rate: the first payment is based on the car's CO2 emissions, and it can range from £10 to several thousand pounds. The full table is on GOV.UK.
Expensive car supplement: an extra £440 a year for 5 years, starting from the second time the car is taxed, if the list price was over £40,000 (£50,000 for electric cars, according to GOV.UK).
Electric cars: GOV.UK says you do not pay the supplement if the car is zero emission and was registered before 1 April 2025. Rules for newer electric cars have changed, so check the current tax rate tables.

If you do not want to use a car for a while, you must tax it or declare it off the road with a SORN. You must make a SORN if the vehicle is not taxed or not insured, and an automatic £80 fine applies if you have neither valid tax or insurance nor a SORN, according to GOV.UK.

The MOT

A car needs an MOT by the third anniversary of its registration, then each year. You can get it done up to a month (minus a day) before it runs out and keep the same renewal date. The maximum fee for a car is £54.85, but garages can charge less. You can be fined up to £1,000 for driving without a valid MOT, and you cannot drive or park on the road if it has run out. The cost of repairs the MOT finds is separate and can be far higher than the test.

Insurance, fuel and servicing

These are the biggest bills for many drivers, but they vary too much for one figure to be useful. Use a comparison site or several quotes to price insurance. Fuel duty is set by the Government, but the pump price depends on the market and the retailer. Servicing and tyres vary by car, so check the manual and ask for quotes. Keep receipts for a year to see what your car really costs.

Business mileage rates

If you use your own car for work and your employer pays you, HMRC's approved mileage rates for 2026 to 2027 are 55p a mile for the first 10,000 business miles in the tax year and 25p a mile after that. For National Insurance the rate is 55p for all business miles. If your employer pays less than the approved rate, you may be able to claim tax relief on the difference. Check HMRC's guidance first, because the rules depend on your situation.

Commuting between home and your normal workplace does not count as business mileage.

Ways to spend less

Compare insurance quotes each year before you renew.
Keep tyres at the right pressure and have the car serviced as the manufacturer recommends.
Pay vehicle tax by a single payment if you can, to avoid the extra £10 of the monthly option.
Work out the cost per mile of short trips you could walk, cycle or take by bus.

Budgeting for these costs is easier if you use a rule such as the 50/30/20 budget, and our cost of living help guide covers support you may be able to claim.

Where to learn more

This guide is for information only and is not tax, benefits or financial advice. Rules and amounts can change, so check the official pages before you rely on them.