Old-fashioned paper road tax discs on the car windscreen may now be a thing of the past, but paying your car tax definitely isn’t! So how is it calculated, and how much will it add to the running costs of that new car you’ve got your eye on? Let’s take a look at how road tax works.
Who needs to pay road tax?
Officially known as Vehicle Excise Duty (VED), road tax or car tax is payable for any car driven or parked on public roads in the UK. The amount you pay in road tax is based on how environmentally-friendly your car is.
There’s good news if you have an electric or low-emission car: you won’t have to pay car tax if your car is brand new, costs less than £40,000 and produces no CO2 emissions. Similarly, if your car was registered between 1 March 2001 and 1 April 2017, you won’t have to pay tax if your car produces 100g or less of CO2 per kilometre. However, you’ll still need to go through the same process as you would to tax any other car – you just won’t have to pay anything.
If your car isn’t being driven or parked on a public road – perhaps it’s being kept locked up in your garage or on your driveway for a period of time – then it still needs to be taxed unless you’ve applied for a Statutory Off-Road Notification (SORN). If you’re the owner of a “historic car” – defined as one 40 years old or more – you’re also exempt from tax.
How much road tax?
The amount of annual road tax you pay depends on a number of factors, and there’s a detailed breakdown of the tax bands here. There are different rules depending on when your car was registered.
For cars registered on or after 1 April 2017, in your car’s first year your tax is based on CO2 emissions, with drivers of diesel cars paying more if they don’t meet the Real Driving Emissions Step 2 standard.
If your car costs less than £40,000 (its ‘list price’ – what it costs from new without any dealership discounts applied), the amount you pay after its first year is based on the type of fuel it uses. For zero emission cars, you won’t pay any tax, but otherwise for petrol and diesel cars you’ll pay £140, and for cars that run on alternative fuel, you’ll pay £130.
For cars worth more than £40,000, you pay these amounts depending on fuel type, plus an extra £310, for the next five years – even if you have an electric car.
If your car was registered between February 2001 and April 2017, your tax will be based on CO2 emissions, while cars registered before 1 March 2001 only have two tax bands based on engine size: £155 for 1549cc or smaller, and £255 for over 1549cc.
Because they produce less CO2, it’s cheaper to tax a motorbike. It’s based on the bike’s engine size, ranging from £19 for 150cc or smaller to £88 for 600cc or more.
When you sell your car
Finally, don’t forget that road tax isn’t transferable from your old car to your new one, but you can claim a refund for any leftover tax from that year. You’ll also need to apply for new tax for your new car, which you can do on the Government website here.