Car Tax Explained

Did you know that some people pay up to £2,070 a year on car tax? For a lot of us, it’s a big running cost. Add to that, the fact that the government often changes the rates of tax (or Vehicle Excise Duty), and it can be quite difficult to keep on top of what you owe.

Car tax explained | Holts Auto

Whether you’re a new driver or you just want to know the current band rates, our car tax guide has you covered. Click the links below to find what you need, or read on for the full guide.

Car Tax: Why Do We Have to Pay It?
Current Car Tax Bands and Rates
How to Tax Your Car
Could You Be Exempt from Paying Car Tax?

Car Tax: Why Do We Have to Pay It?

Car tax applies to all vehicles on UK roads, including cars, motorbikes and lorries. It’s based on how much CO2 your car produces, to cover the cost of the emissions and environmental impact. The government uses the money from car tax to fund environmental improvement schemes, local projects and other things like infrastructure.

A lot of people think that car tax covers the cost of maintaining roads, but this isn’t the case. The upkeep of roads is paid for by council tax and income tax, with VED only charged for tailpipe emissions of CO2 from petrol and diesel vehicles.

Car tax explained | Holts Auto

The different car tax rates are separated into bands which are based on the amount of C02 a vehicle makes in grams per kilometre (g/km, for short). So, if your car’s eco-friendly and makes less than 100 g/km you’ll pay less tax, but if it’s 255 g/km and above you’ll be on the highest rate of tax.

Car tax rates are set by the government and change quite often depending on environmental targets and the budget. So, even if you’ve bought a new car with a low rate of tax, it might change after a year or so and you could find yourself paying a different amount.

Current Car Tax Bands and Rates

Some of the biggest changes to car tax rates in years came into force in April 2018, with most cars affected across the different tax bands. If you’re not sure how much you now need to pay to tax your car, we’ve listed all the current car tax rates below separated by their year of manufacture.

Cars registered on or after 1 April 2017

CO2 emissions (g/km)First year rate (£)First year rate – diesel (£)
000
1-501025
51-7525105
76-90105125
91-100125145
101-110145165
111-130165205
131-150205515
151-170515830
171-1908301,240
191-2251,2401,760
226-2551,7602,070
Over 2552,0702,070

After the first year, you’ll pay £140 a year for a petrol or diesel car worth up to £40,000. For cars worth over £40,000, you’ll pay £310 for five years and then go down to a standard rate of tax depending on the type of fuel (£140 for petrol or diesel).

Cars registered between February 2001 and 1 April 2017

CO2 emissions (g/km)12-month cost (£)
Up to 1000
101-11020
111-12030
121-130120
131-140140
141-150155
151-165195
166-175230
176-185250
186-200290
201-225315
226-255540
Over 255555

Source:gov.uk

As you can see from the tables, car tax can be quite a lump if you drive a powerful, fuel-guzzling car, so it’s an important thing to factor in when you’re budgeting for a new car. The good news is it’s now possible to pay for car tax by monthly direct debit, helping you spread the cost of taxing your car.

How to Tax Your Car

Taxing a car may be more expensive now, but it’s definitely easier than it used to be. You can do it all online and you don’t need a tax disc, and flexible payment options mean you won’t need to scrimp and save when your car tax is due.

Car tax explained | Holts Auto

Here’s a step-by-step guide to taxing a car in the UK.

Step 1

To tax your car you’ll first need a reference number. This can be found on documents like:

  • A V11 car tax reminder form from the DVLA
  • The vehicle log book (V5C) in your name
  • The new keeper details slip (V5C/2) from a log book if you’ve just bought the car

Even if you’re exempt from paying tax, you still need to tax it. You can do this by following the same steps listed below.

Step 2

Head to the gov.uk vehicle tax portal. This is where you can tax your car, work out how much tax you owe using a calculator, and get more information about whether you’re exempt from paying tax.

Step 3

Follow the instructions and have your 11-digit reference number ready. The system will find your car and work out how much you owe based on this number. You’ll then be asked to pay via debit/credit card or Direct Debit.

Step 4

Once you’ve paid the car tax or set up a payment plan, your car is officially taxed, and you should get a confirmation email from the DVLA. You don’t need to display a tax disc or do anything else.

If you want to check that your vehicle is taxed and when the tax is due for renewal, you can use this tool. This also tells you when the MOT is due.

Could You Be Exempt from Paying Car Tax?

Depending on the type of car you drive and your own circumstances, you might be exempt from paying car tax. Here’s the criteria for car tax exemption:

  • If you drive a brand-new car that makes 0 g/km of CO2 and is worth less than £40,000
  • If you drive a car registered between 1 March 2001 and 1 April 2017 that produces less than 100 g/km of CO2
  • If you have a disability, car tax is free in some circumstances, including if you have a mobility scooter, receive the higher rate of Disability Living Allowance, or receive a War Pensioners’ Mobility Supplement.
  • If you drive a classic car that’s over 40 years old

For more of the latest motoring advice and how-to guides, check out the rest of the Holts blog. If you’re looking for info on our DIY car maintenance tools and products, visit the homepage today.