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Car tax bands explained

May 18, 2021

Car tax is one of the regular payments you need to make when you own a car. The amount you have to pay varies according to the age and power of your vehicle. Let’s look at the different car tax bands and how they apply to different types of vehicle.

As a young driver, expenses can easily add up – tax, MOTs, servicing, fuel. Why not consider young driver insurance using a black box to help bring down the cost of motoring?

What is car tax?

Car tax is an informal name for Vehicle Excise Duty (VED). It is also sometimes known as road tax. Each year VED raises around £6.5 billion from the nation’s motorists.

The money raised from car tax goes into general government spending, rather than being spent in specific motoring-related areas.

A row of parked cars on a residential road
What are the car tax bands?

Car tax is calculated according to a banded system. The amount you have to pay is based on the age of your vehicle, its engine size, its CO2 emissions and, if it was registered after 2017, the vehicle list price. You also pay a higher amount in the first year after registration.

You can find your vehicle’s first registration date by checking your V5C document that you got when you bought the car, or using the Driver and Vehicle Licensing Agency’s (DVLA’s) online vehicle information service.

This will also tell you your vehicle’s MOT renewal date and the vehicle’s European emission status.

Let’s go through the car tax bands in turn, as stated on the government’s website.

Cars registered after April 2017 Vehicles registered after April 2017 are subject to a first year car tax band. The bands vary according to CO2 emissions (g/km).

A table comparing CO2 emissions to cost of tax by fuel used in vehicle

These prices apply in the first year that a car is on the road. As you see, cars that use alternative fuels, such as electric cars and hybrid vehicles, pay a lower rate than cars that drive on fossil fuels.

Your car tax payment covers your vehicle for one year; if you do not drive the car for a full year (for example, if you sell it) then you will be refunded any outstanding tax.

For the second and subsequent years after registration, a simpler system applies for all but the most expensive cars, which are required to pay a premium rate.

Two tables showing tax cost of vehicles against their fuel type and cost of tax of vehicles over £40,000 list price
Tax bands for older cars

A different system applies for cars registered between 1st March 2001 and 31st March 2017. These vehicles are taxed according to fuel type and CO2 emissions.

A table comparing CO2 emissions of petrol and diesel cars to cost of tax
A table comparing cost of tax of alternative fuel vehicles to CO2 emissions

For cars registered before 1st March 2001, the vehicle tax rate is based on engine size.

A table showing vehicle engine size compared to tax cost
How do you find out a car’s carbon emissions?

If all that seems a bit too complex, don’t worry – once you identify some vehicle models you are interested in buying, you can use the online vehicle tax rate calculator to find out how much the VED would be for that vehicle.

Your dealer may also be able to help you work out which band your chosen vehicle falls into. It is always a good idea to have a clear picture of the costs that apply to your chosen vehicle before purchase – for example, what premiums you will pay for young driver insurance, what the maintenance costs of that vehicle will be, and whether it is fuel efficient if you’re going to be driving a lot of miles.

What happens if you do not tax your vehicle?

You must ensure your vehicle car tax payments are kept up to date. The DVLA computer runs a regular database check to identify vehicles without outstanding tax bills.

This check then generates an automated letter that will be sent to you in the post requiring you to pay a £80 fine and update your tax. No points will be added to your licence. If you pay the fine within 28 days, a 50% discount is applied.

Failure to pay the fine could result in you being prosecuted and you may incur a fine of up to £1,000 if the case goes to court and you are convicted. You will also have legal costs and a criminal conviction, which will make insurance for young drivers harder to find and much more expensive.

The police may also pick up on untaxed cars during regular checks using Automatic Number Plate Recognition (ANPR) cameras. Motorists who fail to tax their vehicles are also often careless about other motoring responsibilities, so you may also face checks on your vehicle condition and insurance.

The only exception is if you have registered your vehicle as being kept off road by completing a Statutory Off Road Notification (SORN). You are also permitted to drive without road tax to a pre-arranged MOT test. This is because you need a valid MOT certificate to be able to tax your vehicle.

You can tax your vehicle or check when renewal of your car tax is due at any time, using the government website.

Failure to pay the fine could result in you being prosecuted and you may incur a fine of up to £1,000 if the case goes to court and you are convicted.

A judge's hammer and scales

Are some vehicles exempt from car tax?

A number of vehicles are exempt from car tax. If your chosen vehicle is over 40 years old then it will be zero rated for tax. For example, in 2021 any vehicle registered before 31st March 1981 is exempt. Although you do not have to pay any tax, you still need to register the vehicle with the DVLA.

Vehicles used by a disabled person may be exempt, as well as disabled passenger vehicles. You can apply for a disabled person’s exemption at a branch of the post office.

Car tax and electric vehicles

The government wants more people to drive electric cars. From 2030, petrol and diesel cars will no longer be sold in the UK as the country transitions to less polluting alternatives. Hybrid vehicles will remain on sale until 2035.

Low car tax is one incentive for buying an electric vehicle (EV). Cars registered between 1st March 2001 and 31st March 2017 with emissions of less than 100g/km of CO2 are exempt from car tax.

Cars registered after 1st April 2017 are exempt from tax if they have zero CO2 emissions. EVs with CO2 emissions above zero pay on a banded scale as shown above.

While electric cars may be a little pricier to purchase, you need to factor in running costs as well as the sales price. For example, over the lifetime of the vehicle, electric cars have much lower fuel costs because electricity is cheaper than petrol or diesel.

EVs also have lower maintenance costs because they have fewer moving parts and therefore less wear and tear.

Buying an electric vehicle could save you money if you regularly travel to a city that runs a low-emissions zone. Electric vehicles compliant with Euro-6 standard are usually exempt from these congestion charges.

There are many factors to take into account when considering whether to buy an EV, such as whether you have a place to charge the vehicle such as a garage or private driveway, or alternatively a local charge point.

You might also want to check whether garages close to your home carry out EV servicing and repairs and have experience working on these types of vehicles.

Electric vehicles are also better suited to urban driving at lower speeds than fast driving on the motorway. If you regularly commute long distances on the motorway, an EV might not suit your current needs.

Save on your young driver insurance

When you start out as a new driver, expenses can easily add up. On top of purchasing a vehicle, you will need to pay for regular servicing, MOT, and car insurance.

For first-time drivers, young driver insurance can be eye-wateringly expensive. That’s why many new drivers choose a black box insurance policy.

Black box insurance uses a telematics device installed in your vehicle to monitor your driving style. If you prove that you are a safe, reliable driver then your car insurance premiums could be reduced in following years.

Why not get in touch with Smartdriverclub today to find out more?