Car Finance Calculators and Guides.
Car Finance Calculators and Guides

What is Car tax? (A guide to Vehicle Excise Duty (VED) )

Vehicle Excise Duty (VED), more commonly known as car tax or road tax, can be a big running cost with cars. It can be anything up to £1,000 or more a year, depending on how kind to the environment the car is. Below you can find out how much road tax you’ll pay on your vehicle and the most recent car tax changes.

Back to basics – Taxing the car

It is mandatory to pay car tax on all vehicles registered in the UK, driven on or kept on a public road. Depending on what car you choose will depend on the amount of tax payable.

One train of thought is choosing a low-tax car could inevitably mean it holds its value better as more people will want to buy it.

A vehicle kept off-road still needs to be taxed or have a SORN (Statutory Off Road Notification) applied to it so the DVLA are aware of the vehicles status.

What are the exepmtions?

The following types of car owners pay no car tax:

  • Owners of band A cars (up to 100 CO2 emission g/km)
  • Owners of a brand new car (in their first year of registration) in band B to D (see table below) – past the first year you’ll need to start paying tax

If you have a disability, you might be entitled to free car tax if you:

  • Have an invalid carriage
  • Receive War Pensioners Mobility Supplement
  • Receive the higher rate of the mobility component of Disability Living Allowance

You don’t have to pay car tax on vehicles made before 1 January 1974 (known as ‘historic vehicles’).

How much will car tax cost me?

For cars registered after March 2017 in the car’s first year the rates will change based on the carbon dioxide emissions of the vehicle.

New tax rates for 2017
CO2 emissions (g/kg)First year rateAlternative fuel cars
0£0£0
1-50£10£0
51-75£25£15
76-90£100£90
91-100£120£110
101-110£140£130
111-130£160£150
131-150£200£190
151-170£500£490
171-190£800£790
191-225£1,200£1,190
226-255£1,700£1,690
Over 255£2,000£1,990

After the first year, it will depend on the type of fuel used. However, if your car has a list price above £40,000 there is more to pay.

Tax based on fuel type after first year
Electric vehicleAlternative fuelPetrol or diesel
£0£130£140

If the list price of the car is above £40,000 at the first registration. Then after the first licence there is an additional £310 to pay for the next 5 years.

Example an electric car with a list price of over £40,000 would pay £310 for the next 5 years.

After 5 years, you’ll pay the standard annual rate depending on what fuel your vehicle uses.

You will need to check the list price with your dealer so you know how much vehicle tax you’ll have to pay.

Cars registered on or after February 2001

The rate of tax you pay depends on the car’s official CO2 emissions and the type of fuel it uses.

Costs can vary from nothing for a zero pollution electric car through to £2,000 for the first year of a heavy polluting vehicle.

The rates are split into bands based on how many grams of carbon dioxide (CO2) a car emits per kilometre driven:

Car tax bands and rates
BandCO2 emission (g/km)Total cost for 12 months
AUp to 100£0.00
B101-110£20.00
C111-120£30.00
D121-130£110.00
E131-140£130.00
F141-150£145.00
G151-165£185.00
H166-175£210.00
I176-185£230.00
J186-200£270.00
K201-225£295.00
L226-255£500.00
MOver 255£515.00

Please note that if your car is in its first year after it was registered the rates are higher in the first year for bands H to M (see below).

For bands E to G the rates are the same in the first year as in following years.

BandCO2 emission (g/km)Total cost for 12 months
H166-175£300.00
I176-185£355.00
J186-200£500.00
K201-225£650.00
L226-255£885.00
MOver 255£1,120.00

Cars registered before 1 March 2001

This tax rate is based on engine size only. There is one rate for engines up to 1549cc and one for over 1549cc.

Engine size (cc)12 months rate
Not over 1549£145.00
Over 1549£235.00

What about displaying a tax disc?

Since 1 October 2014 you are no longer required to display a tax disc in your windscreen.

The DVLA (Driver and Vehicle Licensing Agency) and police now use an electronic register to check people have paid their car tax. As the car is registered to the owners home or work address any failure to pay notices are easily communicated.

Note – These days when you buy a vehicle, the car tax will no longer be transferred with the vehicle. So you must tax it before you can drive away in it.