GuidesHow car tax works

In the UK, car tax, officially known as Vehicle Excise Duty (VED), is a tax levied by the vehicle licensing agency on most vehicles that are used or parked on public roads. The amount of vehicle tax that you pay depends on several factors, including the type of vehicle, its CO2 emissions, and the fuel type.

 

Vehicle Type

The amount of car tax you pay depends on the type of vehicle you own. There are different rates of tax for cars, motorcycles, vans, and other vehicles.

 

CO2 emissions

Vehicles are placed in different tax bands based on their CO2 emissions. The lower the emissions, the lower the tax rate. The rates vary depending on the vehicle’s fuel type, with higher rates for diesel and petrol vehicles.

Diesel cars

Diesel cars generally emit more CO2 than petrol cars, so their car tax rates tend to be higher. However, some diesel cars are fitted with emissions-reducing technology, which can reduce their car tax rates. From 1 April 2018, all new diesel cars that don’t meet certain emissions standards are subject to a higher rate of car tax.

Alternative fuel cars

Alternative fuel cars, such as those powered by LPG, biofuels, or hybrid vehicles, tend to have lower CO2 emissions than petrol or diesel cars. As a result, they are often eligible for lower car tax rates. From 1 April 2020, the government introduced new car tax rates for hybrid cars, which are based on their CO2 emissions and electric range.

Electric cars

Electric cars are zero-emission vehicles and are therefore exempt from car tax or VED. This exemption applies not only to the first year but to all subsequent years as well. It’s worth noting that electric cars may still be subject to other charges such as congestion charges or low emission zones in certain cities.

 

UK Car tax bands explained

Car tax bands are based on a vehicle’s CO2 emissions, and they determine the amount of tax you’ll pay. The lower the CO2 emissions, the lower the tax rate. Here are the current car tax bands in the UK.

Zero-emission vehicles

This includes fully electric and hydrogen fuel cell vehicles. They are exempt from car tax, but you still need to register them with the DVLA.

Standard rate for petrol and diesel cars

For cars registered after April 2017, the standard rate for petrol and diesel vehicles is based on CO2 emissions as follows:

• Vehicles emitting 0-50g/km CO2: £10
• Vehicles emitting 51-75g/km CO2: £25
• Vehicles emitting 76-90g/km CO2: £115
• Vehicles emitting 91-100g/km CO2: £140
• Vehicles emitting 101-110g/km CO2: £160
• Vehicles emitting 111-130g/km CO2: £205
• Vehicles emitting 131-150g/km CO2: £515
• Vehicles emitting 151-170g/km CO2: £830
• Vehicles emitting 171-190g/km CO2: £1,305
• Vehicles emitting 191-225g/km CO2: £1,850
• Vehicles emitting 226-255g/km CO2: £2,245
• Vehicles emitting over 255g/km CO2: £2,245

 

Standard rate for alternative fuel vehicles

For cars registered after April 2017, the standard rate for alternative fuel vehicles (such as hybrids) is based on CO2 emissions as follows:

• Vehicles emitting 0-50g/km CO2: £0
• Vehicles emitting 51-75g/km CO2: £15
• Vehicles emitting 76-90g/km CO2: £105
• Vehicles emitting 91-100g/km CO2: £130
• Vehicles emitting 101-110g/km CO2: £150
• Vehicles emitting 111-130g/km CO2: £190
• Vehicles emitting 131-150g/km CO2: £505
• Vehicles emitting 151-170g/km CO2: £820
• Vehicles emitting 171-190g/km CO2: £1,280
• Vehicles emitting 191-225g/km CO2: £1,815
• Vehicles emitting 226-255g/km CO2: £2,135
• Vehicles emitting over 255g/km CO2: £2,135

It’s important to note that cars registered before April 2017 are subject to different tax rates based on engine size, fuel type, and CO2 emissions. The exact tax rates for these cars can be found on the UK government website gov.uk

 

First-year rate

The first-year rate of car tax is based on the CO2 emissions of the vehicle. This rate is usually higher than subsequent years and applies to all new vehicles. Zero-emission cars are exempt from first-year tax.

 

Standard rate

After the first year, most cars will pay a standard rate of car tax, which is based on their CO2 emissions. The rate is usually paid annually or bi-annually.

 

Alternative fuel discount

Cars that use alternative fuels, may be eligible for a discount on their car tax.

 

Car tax on zero emission vehicles

Zero-emission cars, which are fully electric, are exempt from paying car tax. This means that if you own a zero-emission car, you won’t have to pay any car tax.

The exemption applies not only to the first year but to all subsequent years as well. This makes zero-emission cars more affordable to own and operate, as you won’t have to pay any ongoing road tax costs.

It’s important to note that while zero-emission cars are exempt from car tax, they may still be subject to other charges such as congestion charges or low emission zones in certain cities.

 

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Classic car road tax

If your classic car meets these criteria, it will be eligible for a reduced rate of road tax. Currently, the rate is set at £0, which means that you won’t need to pay any road tax for your classic car. However, you still need to register your vehicle with the DVLA.

It’s worth noting that if your classic car was manufactured before 1st January 1973, it’s exempt from road tax altogether and you don’t need to apply for the historic vehicle tax class.

In the UK, classic cars that were first registered more than 40 years ago are eligible for a reduced rate of car tax, which is sometimes referred to as “historic vehicle” or “classic car” road tax. This reduced rate of tax is designed to reflect the fact that these vehicles are used less frequently and are often considered to be of historic or cultural interest.

To be eligible for classic car road tax, a vehicle must be at least 40 years old and must not have been substantially modified since it was first built.

Reduced rate

Classic cars are subject to a reduced rate of car tax, which is currently set at £0. This means that if you own a classic car, you won’t have to pay any car tax, regardless of the vehicle’s emissions.

Limited use

Classic cars that are registered for reduced-rate car tax are subject to restrictions on their use. They can only be driven to and from pre-arranged events, such as exhibitions, rallies, or other organised events. They can’t be used for everyday commuting or other regular journeys.

MOT exemption

In addition to reduced-rate car tax, classic cars that were first registered more than 40 years ago are also exempt from requiring an MOT test. However, owners are still responsible for ensuring that their vehicles are roadworthy and safe to drive.

It’s worth noting that classic cars that are used for regular journeys or are modified from their original specifications will not be eligible for the reduced-rate car tax.

 

When do you have to pay your car tax?

You must pay your car tax before you can drive your vehicle on the road. The amount of car tax you need to pay depends on various factors such as the type of vehicle, its CO2 emissions, and the fuel type.

If you have a new car, the cost of car tax is usually included in the purchase price for the first year. After that, you will need to pay for car tax on a yearly or monthly basis.

If your vehicle is exempt from car tax, you still need to apply for exemption. Exemptions are available for vehicles that have low CO2 emissions, are electric or hybrid, or are registered as historic vehicles.

 

How to pay your car tax

 

Annually

You can pay your car tax each year by making a one-off payment, or by setting up a direct debit to automatically pay each year. You’ll receive a reminder from the DVLA when your tax is due for renewal, and you must make sure to pay it on time.

Monthly

You can also pay your car tax in monthly instalments, but you’ll need to set up a direct debit to do so. The first payment will be higher than subsequent payments to cover the first year’s tax.

 

Ways of paying car tax

 

What happens to an untaxed vehicle

It is illegal to drive or keep an untaxed vehicle on public roads. If you fail to pay your car tax or don’t declare that your vehicle is off the road (SORN) and not in use, you may face penalties and enforcement action.

 

Penalty fees

If you’re caught driving an untaxed vehicle, you’ll receive a Fixed Penalty Notice (FPN) of £80. If you pay in 33 days this is reduced to £40.

Wheel clamping

The police, the local council or the DVLA can clamp and tow away cars or other vehicles parked illegally on roads or public land. The DVLA can act when it has the lawful authority to do so if a car is untaxed, unless it’s parked on your own property.

You’ll have to pay a release fee, which can be quite expensive, to have the clamp removed or the vehicle recovered. The vehicle is stored for a statutory period of between 7 and 14 days. If the vehicle is not claimed within this time, it may be disposed of by auction, breaking or crushing.

Legal action

In extreme cases, you may face legal action and court proceedings for failing to pay car tax. This can result in a fine of up to £1,000, or five times the chargeable tax, whichever is the greater, and a court appearance.

It’s important to note that the DVLA has access to Automatic Number Plate Recognition (ANPR) cameras, which can quickly identify untaxed vehicles on public roads. So, if you fail to pay your car tax, you’re likely to get caught.

 

 

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