VED road tax: everything you need to know about UK car tax

Baffled by the UK car road tax system? Our comprehensive guide explains how much you'll pay on your next car

The UK road tax system, or Vehicle Excise Duty (VED) frequently changes. Given road tax generates around £5 billion a year for government coffers, small tweaks to the system can yield significant losses or gains in duty for the Treasury.

In April 2017, for example, the carbon dioxide-based road tax system was replaced by a flat-rate annual payment for most cars, brought about because new cars were emitting less and less CO2 over the years, leading to reduced revenue for the Treasury.

• 2018 road tax changes explained

And 2018 saw two changes to the VED system. In April, diesel cars went up a VED band for their first-year rates, while in October the Chancellor made good on a 2015 promise that all road tax would be spent on roads – although this won’t kick in until 2020. 

How much will it cost to tax my car?

This depends on when a car is bought: with the exception of inflationary increases, changes to the road tax system are not retroactively applied, so the system that was in place when a car was first purchased will stand for as long as it is on the road – though annual rates are subject to inflationary increases.

If you’re buying a new car, then you will pay road tax based on the system that was introduced on 1 April 2017, updated in April 2018, and is set experience an inflationary increase in April 2019.

• VED tax bands explained

First-year rate

The first-year of road tax is included in a car’s on-the-road (OTR) price and is based on its carbon dioxide emissions.  

The first-year rate ranges from £0 for zero-emission cars, to £2,070 for models that emit 226g/km or more. Note all new diesel cars sit one band higher for the first year rate. This means a petrol car that emits 110g/km of CO2 will cost £145 for the first year, while an equivalent diesel will be £165.

Diesels that meet what the Chancellor dubbed the “latest” emission standards technically sit in the same first-year band as petrol cars, but as these standards (RDE2) are yet to be officially introduced, all the first-year bump-up applies to all diesel models for the time being.

Annual rate

The annual flat rate is £140. There’s a £10 discount for alternatively fuelled vehicles (hybrids and PHEVs), so their owners pay £130 a year.

Cars that cost £40,000 or more (after options) are subject to a further £310 annual supplement that runs for five years. This kicks in after the first-year CO2-based charge, so you’ll pay the supplement from years two to six of the car’s life. This means you’ll pay £450 a year, for five years, if you car tips the £40,000 barrier. After that, annual road tax reverts back to the £140 a year (£130 for hybrids) charge.

Note if you haggle a plus-£40,000 car down to below £40,000, you’ll still have to pay the supplement.

Fully electric cars like the Nissan Leaf are except from both first-year and annual road tax, thought EVs that cost £40,000 or more are still subject to the £310 supplement.

Inflationary increases from April 2019

The Autumn 2018 Budget saw road tax left largely alone, though annual and first-year rates were increased in-line with inflation.

This increased the annual flat rate for normal cars from £140 to £145, while hybrids went up from £130 to £135. These increases apply to all cars that are covered by the post-2017 road tax regime.

First-year rates also increased to reflect inflation. These hikes range from £0 to £65, depending on which CO2-based band the car sits in.

The rates are as follows: 

VED tax bands for new cars registered from 1/4/2017 onwardsVED car tax bands for cars first registered from 2017 onwardsEmissions (g/km of CO2)Diesel cars meeting RDE2 and petrol cars first-year rateAll other diesels first-year rateAlternative-fuel vehicle first-year rateStandard petrol/diesel annual rateStandard alternative fuel annual rate0£0£0£0£0£01-50£10£25£0£140£13051-75£25£105£1576-90£105£125£9591-100£125£145£115101-110£145£165£135111-130£165£205£155131-150£205£515£195151-170£515£830£505171-190£830£1,240£820191-225£1,240£1,760£1,230226-255£1,760£2,070£1,750Over 255£2,070£2,070£2,060Cars above £40,000 pay £310 annual supplement for five years from the second year of registration.

If all of these changes seem daunting, they won’t affect a car that has already been registered and is liable to annual road tax and a previous regime (with the exception of inflationary increases.)

These tax changes don’t apply to vans or pick-up trucks, either, as these qualify for light commercial vehicle (LCV) road tax, which is independent of car tax. This is currently set at a flat rate of £250, although like car tax this can be changed by the Treasury in future Budget statements to reflect vehicle buying trends.

Road tax for older cars

If all of these changes seem daunting, they won’t affect a car that has already been registered and is liable to annual road tax. None of these new tax rates are backdated, so they will only apply to new cars, so your current car will cost the same in road tax for the rest of its serviceable life, including if you put it back on the road after making a SORN (Statutory Off-Road Notification) declaration.

These tax changes don’t apply to vans or pick-up trucks, either, as these qualify for light commercial vehicle (LCV) road tax, which is independent of car tax. This is currently set at a flat rate of £240, although like car tax this can be changed by the Treasury in future Budget statements to reflect vehicle buying trends.

Road tax for cars registered from 1 March 2001 to 31 March 2017

The Government first introduced emissions-based vehicle taxation in 2001, when it created tax bands for cars which increased the amount of road tax paid depending on the emissions produced by a car. When the most recent road tax changes took place on 1 April 2017, all cars registered in the previous way had their tax frozen at the following rates:

VED road tax for cars registered 1/3/01-31/3/17 

VED BandCO2 EmissionsAnnual rateFirst year rateAUp to 100 g/km£0£0B101-110 g/km£20£0C111-120 g/km£30£0D121-130 g/km£110£0E131-140 g/km£130£130F141-150 g/km£145£145G151-165 g/km£185£185H166-175 g/km£210£300I176-185 g/km£230£355J186-200 g/km£270£500K*201-225 g/km£295£650L226-255 g/km£500£885MOver 255 g/km£515£1,120

*The Band K rate also applies to cars that were registered before 23 March 2006 and have an emissions figure over 225g/km.

Switchover winners and losers

With the switchover to the new road tax rules in 2017, it created a window of two-tier taxation for cars registered around the time of the change. Go for a used car on a 66 or 17-plate that was registered before 1 April 2017, and the tax rate could be vastly different to a 17-plate car registered shortly after that date.

For example, the Peugeot 208 1.2 PureTech (82) has emissions of 104g/km. If you bought one that was registered before 1 April 2017, then you’ll pay £20 a year in road tax. However, one registered after that date is subject to the £140 rate of tax, meaning a 700% rise in tax costs.

In most instances road tax will be higher on the later car, especially on those with list prices over £40,000, despite the fact both cars will have the same emissions figures. Conversely, there are a handful of models that actually cost less to tax under the newer system. One particular beneficiary is the Ford Mustang 5.0 V8. If you bought one before 1 April 2017, then you’d be paying £515 a year in road tax, thanks to its emissions figure of 299g/km. After 1 April 2017, and thanks to the Mustang’s sub-£40k list price, that drops to £140 a year. However, with the introduction of the facelifted Mustang, Ford raised list prices over the £40k threshold, so it’s less of a bargain than before, although £450 is still less than when it was first put on sale.

These are just two extremes of the change in the system, and canny used car buyers will be able to save themselves a few quid in annual road tax by doing a bit of detective work before buying. Just check the exact emissions figure of the car you’re looking at and use our table above to see how much you’ll pay in road tax, and you could easily reap the benefits by going for a car registered before or after 1 April 2017.

Road tax for cars registered before 1 March 2001

If you run a car that was registered before 1 March 2001, then it qualifies for another road tax system. This one is simply split into two, and is based on your car’s engine capacity:

Cars over 1,549cc: £245 a year
Cars under 1,549cc: £150 a year

You can find out the size of a car’s engine by logging on to the DVLA’s vehicle enquiry service. All you need is the car’s registration, and it will come back with the make and colour of the car before showing information about the engine capacity and other details about the car. If you have the car’s V5C registration certificate (logbook), then you can enter the 11-digit reference number which will show you the tax rates for a vehicle. This applies to any car that’s been registered and is on the road.

Taking your car off the road

If you are not going to use your car for a long period (anything longer than 6 months) you can use a Statutory Off Road Notification (SORN) to avoid paying road tax while you’re not using it. However, off the road means off the road – you can’t declare SORN unless you have off-street parking, a garage or some other kind of storage that’s away from the public highway. Even if a car is parked in the road for a long period, it needs to have road tax to be parked there – ergo it also has to have an MoT and insurance to get tax in the first place.

You can make a SORN declaration at any time if you have the V5C registration document, or the more common way is to declare SORN when the vehicle’s road tax reminder comes through the post from the DVLA. Then you can use the 16-digit renewal code to declare SORN. Once the vehicle has a SORN, you’ll get written confirmation in the post, but you won’t get any annual reminders about the vehicle’s SORN status.

If you declare SORN while there’s time left on the current road tax, you can reclaim the outstanding amount and get it refunded, although it will only be for a full month’s tax, so from the first of the month after you declare a SORN.

When you want to put your vehicle back on the road, simply tax the vehicle and your SORN is cancelled automatically. The only time you can drive a vehicle that has been SORNed is if you’re going to a pre-booked MoT appointment or other vehicle test. Drive it on the road for any other reason, and you could face a fine of up to £2,500.

If you’re making a SORN declaration for a vehicle that isn’t yours (if the owner has passed away, for example), then you need to apply for SORN by post using form V890 and filling out the relevant information, along with the information needed from the vehicle’s V5C registration document.

Classic car road tax

You may have heard that classic cars are exempt from road tax. This is true, although if you own a classic car, it’s not simply a case of ignoring the DVLA reminders and going on your merry way. You have to apply for road tax exemption, and depending on the age of your classic car, there are still legal requirements you need to meet.

At the moment, cars, vans and motorcycles that were registered before 1 January 1977 can qualify for road tax exemption. However, the Government put a rolling exemption in place, so cars registered before 1 January 1978 will qualify for exemption, then 1 January 1979, 1980, 1981 and so on.

Owners need to apply for exemption before they can wave goodbye to paying road tax. You can do this at the Post Office as if you’re paying road tax, so you’ll need the car’s V5C registration document, a road tax reminder (if you have one), a valid MoT and proof of insurance. The Post Office will then send your V5C off to the DVLA, who will then amend your V5C and send you an updated logbook within 10 working days. In the meantime, you can still use your classic car.

There are a few more bits of legislation regarding classic cars, depending on the date they were registered:

Classic cars registered from 1 January 1960: If you’ve applied for road tax exemption, you still need a valid annual MoT and insurance.

Classic cars registered before 1 January 1960: All you need is valid insurance, there’s no road tax to pay, and no MoT is needed either.

Whatever car you are looking at, whether you want to know when your own road tax is due, or if you want to find out about a potential used car’s tax status and cost, then you can do exactly that at the Government website.

The tax disc

The system for collecting and enforcing road tax was overhauled in 2014, when the Government abolished the tax disc. After 93 years, it was decided that a small circle of paper in your windscreen was no longer necessary, and its abolition made the whole system cheaper to run. There is a catch, however, as you’ll find out below.

The current road tax set-up makes it tougher for those seeking to avoid paying road tax. Rather than the visual check that the tax disc made possible, the authorities now rely on number-plate recognition cameras to determine that a vehicle has been taxed.

Although it’s no longer a requirement to display a tax disc in your windscreen, this doesn’t mean you don’t have to pay. The DVLA will send you a reminder when your road tax is up for renewal in the time-honoured fashion, and you can continue to pay your road tax online, over the phone or at the Post Office.

The existing options of paying for 12 or 6 months tax up front are still on offer (for most tax levels), but there’s also the option of paying your car tax monthly. This new monthly option arrives in tandem with the facility to pay your road tax by Direct Debit.

Drivers paying in monthly instalments from a bank account will be subject to a 5% surcharge on top of the road tax price itself. However, that’s less than the 10% premium you’ll pay when buying six months of road tax, an option currently used by 23% of motorists. Only the one-off annual payment comes with no extra charges.

The key advantage of paying your car tax by Direct Debit is that the DVLA will continue taking the payments until you tell them to stop. It means that you’ll no longer need to remember to pay your road tax once a year, although of course you still need to ensure that your car has valid insurance cover and an MoT certificate if it’s over three years old before you can renew your road tax.

What happens to your road tax when you sell your car?

Under the current car tax system, any remaining road tax you have when you sell your car, it will not transfer to the new owner with the vehicle. Instead, the seller can get a road tax refund on any tax remaining on the vehicle, while the buyer has to pay to re-tax the car.

The tax refund on a sold car will be sent automatically when the DVLA receives notification that the car has been sold, scrapped, exported or taken off the road with a Statutory Off Road Notification (SORN).

Sellers are expected to inform the DVLA of any change of ownership straight away or face a £1,000 fine. If they don’t, they could also still be liable for speeding or parking fines incurred by the new owner.

Information on whether or not a car is taxed is available online via the Government website. All you need is the make and model of the car plus the registration number.

Is there a catch to the Vehicle Excise Duty regime?

So far, so good for the road tax system but as often seems to be the case, there is a catch.

The problem that’s getting motorists riled centres around the refund you get on outstanding road tax when you sell your car. When ownership of a vehicle is transferred the previous owner gets a refund on any outstanding road tax, but that refund is calculated from the beginning of the next month. The new owner, on the other hand, has to tax the car anew and their bill is calculated from the beginning of the current month.

• Practical driving test: top tips for passing

What this means is that the Government effectively collects two lots of tax on the car for the month where ownership is transferred, one from the new owner who pays for that month and one from the previous owner who doesn’t get the tax for that month included in their refund. It’s sneaky stuff and should give a useful boost to the exchequer, but at the expense of motorists.

Leave a Reply

Your email address will not be published. Required fields are marked *