Car tax, road tax, or as it is officially called, Vehicle Excise Duty (VED), is a fee payable to the government to give the car permission to drive on the roads. It is a tax that all road users have to pay if their car is registered in the UK. It can be a pretty large expense for individuals, with some paying over £1000 a year.
Depending on when your car was registered the rules around how much you pay can vary. For example, in 2001, the rules around the tax law changed for newly registered vehicles. Instead of tax based on engine size, it was based on how much CO2 is emitted into the atmosphere.
Therefore it has become a green levy. These days it makes sense to purchase a car which has low emissions as this can save you a lot of money. In addition to this, a low emissions vehicle may hold its value better than a high emissions vehicle, especially as the rules around this become stricter.
Is anyone exempt from paying tax?
There are several conditions where the road user is exempt from paying road tax. They are:
- If you own a brand new car that produces zero grams of CO2 and it costs less than £40,000.
- Anyone who owns a car registered between 1 March 2001 and 1 April 2017 that produces up to 100 grams of C02 per kilometer.
- Some people with disabilities are exempt. For example, in cases such as they need a mobility scooter, or they received a War Pensions mobility supplement, or they receive the high rate Disability Living Allowance benefit.
- If you have any car and keep it off the road, you need to complete a SORN document to avoid paying road tax.
- You have a very old car.
What are the tax bands?
Tax bands determine the amount of tax you will pay for your vehicle, and this first of all depends on when the car was first registered:
Any car registered more than 40 years ago is exempt, they pay no tax.
Registered Before 1 March 2001 but less than 40 years ago
If your car was first registered before 1 March 2001, it will be taxed based on the size of the engine. The tax you will pay falls into two categories:
- Equal to, or under 1599cc, the cost is £145 for a year, or £79.75 for six months.
- Over 1599cc, again the cost is currently £235 for a year, or 129.25 for six months.
Cars registered between 1 March 2001 and 1 April 2017
Any cars registered between this time period will have the tax rate they pay determined by the official CO2 emissions of the particular car.
- The tax rate here is split into 13 different bands, A to M, where basically the lower the CO2 emissions your car produces, the cheaper your road tax will be.
- Band A is less than 100 grams per kilometre and is free.
- The top band M is over 255 grams per kilometre, and this is £555, so the prices increase in value for each band, all the way up to M.
- A new rule was introduced in 2010, where cars registered between April 2010 and 1 April 2017 have to pay a ‘showroom tax,’ or a first-year tax rate. This tax was designed to be an incentive for consumers to buy efficient vehicles. There is no first-year tax on cars which produce less than 130 grams per kilometre.
- If your car has an alternative form of fuel, such as hybrid electric cars, and falls onto one of the emission bands, there is a £10 discount over regular petrol or diesel cars.
- Cars registered before 23 March 2006 will have a maximum price of £315 even if it is a real gas guzzler and emits loads of CO2.
- For more information about tax bands to find out exactly what you will pay look here at the tax table.
Cars registered after 1 April 2017.
The only cars exempt from any road tax are ones who emit zero grams per kilometre.
- Any car that produces CO2 will pay £140 showroom tax.
- Alternative fuel cars will pay £130 if they produce any CO2.
- There is a sliding scale of road tax all the way up to 255 grams per kilometre where road users will pay £2000. Here is the table for your information.
- Cars over £40,000 in value will pay £310 supplement for the first five years, even if the car produces no CO2 emissions.