Car tax: How do car tax bands work?
Car Tax is a tax levied on almost all cars that are used on public roads in the UK. Every year, the DVLA (Driver and Vehicle Licensing Agency) collects around £5.6 billion in Car Tax from UK drivers.
Once a car has been registered, it is placed into a Car Tax band that determines how much the owner of the vehicle will pay in tax each year. Cars made since 2001 are taxed based on age, CO2 emissions, and price. Older cars are taxed based on their engine size.
So what are the different Car Tax bands? How are vehicles sorted into each group? And how much does each Car Tax band pay?
We will answer all these questions and more as we explore how Car Tax bands work?
How do Car Tax bands work?
Since 2001, car tax rates have been split into two groups of 13 bands based on the CO2 emissions of the vehicle, with cars made between 2001-2017 forming one group and those made from 2017 onwards forming another. Generally speaking, the lower CO2 emissions are placed into the lower bands, which pay a lower rate of tax.
Cars made between 1980 and 2001 are taxed based on engine size, and any vehicle made before then is not taxed. Motorhomes, motorcycles, and tricycles also pay Car Tax, but their rates are worked out separately.
So let’s jump in and take a closer look at the details of Car Tax.
What is Car Tax?
Car Tax (sometimes known as “Road Tax”, “Vehicle Tax”, “Vehicle Excise Duty”, or “VED”) is an annual tax that all vehicles must pay to legally drive on public roads in the UK.
Modern Car Tax was first introduced in 1937 and replaced the old road tax system, dating back to Hackney Carriages’ taxation in the 17th century!
The rate of Car Tax you pay is based on the age of your vehicle and the level of its CO2 emissions. You can find the official CO2 emissions of your car on the V5c registration document (the vehicle logbook).
Each car is grouped by the year it was made. There are then 13 different rates of Car Tax for each group that are sometimes known as Car Tax bands, Road Tax banks, or VED bands.
Cars made prior to 2001 have slightly different rules and groupings, as we will come to see.
Do all vehicles pay Car Tax?
Most vehicles that are registered in the UK and used on public roads have to pay Car Tax. This includes motorcycles, tricycles, and motorhomes. Vans and lorries pay a separate tax.
However, there are some exempt vehicles that pay no Car Tax at all.
Vehicles that are exempt include:
Cars that were made before the 31st of March 1980. They are regarded as historic vehicles.Cars that have drivers who are registered disabled.Cars with zero CO2 emissions.
How does the age of a car affect its tax band?
The initial grouping of your car is determined by when it was made.
If your car was made:
On or after the 1st of April 2017, the first annual tax is based on the official CO2 emissions registered when the car was first produced. After the first year, the level of tax is subject to change during an annual renewal based on the fuel type. For vehicles priced over £40,000, there is an additional annual tax after the first year of £355 for five years, but this doesn’t include zero-emission cars.Between the 1st of March 2001 and the 31st of March 2017, you pay the annual Car Tax based on the official CO2 emissions that were registered when the car was first produced and the fuel type.Before the 1st of March 2001, then the Car Tax you pay is determined by the size of the engine.Before the 31st of March 1980, your car is considered a historic vehicle and is tax-exempt, though it must still be registered with the DVLA. This is a rolling exemption, and cars manufactured more than 40 years ago are exempt from paying tax.
How does the fuel type of a car affect its tax band?
The amount of tax paid by the drivers of cars made on or after the 1st of March 2001 is, in part, based on the fuel type it uses.
Cars made between the 1st of March 2001 and the 31st of March 2017 are split into those that use petrol or diesel and those that use alternative fuel.
Alternative fuel vehicles include liquid petroleum gas, hybrids, and bioethanol powered. Diesel and petrol-powered cars pay more than alternative fuel vehicles unless they produce less than 100 grams of CO2, in which case both classes of vehicles pay nothing.
Cars made on or after the 1st of April 2017 are split into those that use RDE2 standard diesel or petrol, non-RDE standard diesel, and alternative fuels. RDE2 standard diesel is for cars that emit no more than 0.080grams of nitrogen oxide per kilometre.
In this group, diesel cars pay the most Car Tax, followed by petrol and RDE2 standard cars, and then cars that use alternative fuel.
How do the CO2 emissions of a car affect its tax band?
The amount of Car Tax paid by the driver of cars made after the 1st of March 2001 is also, in part, determined by the amount of C02 emissions it makes.
CO2 emissions are measured by gram per kilometre travelled.
In both groups (2001 – 2017 and 2017 – onwards), cars with 0 grams of CO2 emissions, such as electric vehicles, pay £0 Car Tax. As the CO2 emissions rise, so too does the amount of Car Tax paid.
What are the Car Tax rates for vehicles registered on or after the 1st of April 2017?
The first annual Car Tax rates for all cars made on or after the 1st of April 2017 are determined by the CO2 emissions and the fuel type of the car. Then, after the first year of tax, the Car Tax rate is solely determined by the fuel type.
The first annual Car Tax rates are as follows:
CO2 emissions – gram per kilometreAnnual Car Tax for RDE2 standard diesel cars
standard and petrol carsAnnual Car Tax for all other diesel carsAnnual Car Tax for alternative fuel cars0£0£0£01 – 50£10£25£051 – 75£25£120£1576 – 90£120£150£11091 – 100£150£170£140101 – 110£170£190£160111 – 130£190£230£180131 – 150£230£585£220151 – 170£585£945£575171 – 190£945£1,420£935191 – 225£1,420£2,015£1,410226 – 255£2,015£2,365£2,005Over 255£2,365£2,365£2,355
Source: gov.uk
After the first annual Car Tax payment, cars registered on or after 1 April 2017 pay Car Tax based on the type of fuel they use.
These rates are as follows:
Fuel typeAnnual tax paymentPetrol or diesel£165Electric£0Alternative£155
What are the Car Tax rates for vehicles registered between the 1st of March 2001 and the 31st of March 2017?
All cars made between the 1st of March 2001 and the 31st of March 2017 are taxed based on their CO2 emissions and the fuel type they use. Unlike newer models, the rate of taxation stays the same beyond the first year.
The rates are as follows:
CO2 emission – grams per kilometreAnnual Car Tax for petrol cars and diesel carsAnnual Car Tax for alternative fuel cars
0 – 100£0£0101 – 110£20£10111 – 120£30£20121 – 130£135£125131 – 140£165£155141 – 150£180£170151 – 165£220£210166 – 175£265£255176 – 185£290£280186 – 200£330£320201 – 225£360£350226 – 255£615£605Over 255£630£620
Source: gov.uk
What are the Car Tax rates for cars registered before the 1st of March 2001?
Cars registered between the 31st of March 1980 and the 1st of March 2001 pay Car Tax based on the size of the engine.
The rates are as follows:
Car engine size (cc)Annual Car Tax1549 and below£180Above 1549£295
Source: gov.uk
What are the car tax rates for motorcycles and tricycles?
Motorcycles and tricycles also pay Car Tax. However, as with older cars, the amount paid is based on the size of the engine.
The rates are as follows:
Engine sizeAnnual Car Tax paymentNot over 150cc£22151-400cc£47401-600cc£73Over 600£101Tricycle not over 150cc£22All other tricycles£101
Source: gov.uk
What are the car tax rates for motorhomes?
Motorhomes also pay Car Tax. The amount of Car Tax a motorhome owner pays is based on the engine size and the purpose of the vehicle.
The Car Tax rates for motorhomes are as follows:
Engine sizeAnnual Car Tax paymentPrivate or light goods engine size 1549 cc and under£180Private or light goods (TC11) engine size 1550 cc and over£295Private heavy goods (TC10)£165
Source: gov.uk
What happens if you don’t pay your Car Tax?
If you don’t tax your vehicle, you will automatically receive a fine of £80. This is reduced to £40 if you pay it within 28 days of receiving it. Even if your car tax is £0, you still need to re-register it with the DVLA each year to avoid a fine.
If you fail to pay the initial fine, you can then be charged up to £1,000.
If you are no longer using your car and it is kept off public roads, you should contact the DVLA and get a Statutory Off Road Notice (SORN), which means you no longer have to pay Car Tax.
The DVLA stopped issuing paper tax discs in 2014 and is now all electronically registered. While this means you may be unsure whether your car is taxed, you can check the tax status of any vehicle by searching its registration number on the DVLA website.
Summary
All cars that are used on UK roads pay tax unless the vehicle has zero C02 emissions, the car was made prior to 1980, or the driver is registered disabled.
Every car is ordered into a Car Tax band that sets the amount of tax the driver of that car will pay. The bands are determined by the level of CO2 emissions, the age of the car, and the type of fuel it uses.
When you buy a new car, it is a good idea to check which tax band it is in so that you have a clear idea of how much the vehicle will cost you to run in total.
