The UK's car tax system will change on April 1; we examine the differences and help you figure out how much Vehicle Excise Duty you'll be paying
28 March 2017

How much do you have to pay to tax your car? From 1 April, that number could change because new rates will be brought in.

How much you'll pay depends on what kind of car you have, how old it is, and how you want to pay. This article should help you make sense of it all.

Vehicle Excise Duty, known as VED, is a tax levied by the government on every vehicle on British public roads, and collected by the Driver and Vehicle Licensing Agency (DVLA). It’s a major source of revenue for the Government, totalling billions of pounds each year, which goes into the central coffers of the exchequer. 

Road tax changes: best cars under £40k to beat the system

Although VED is often referred to as road tax, this is misleading – the tax isn’t on the road, it’s on the vehicles that use it. Road tax was abolished in the 1930s, and the cost of maintaining Britain’s roads is currently covered by general taxation, not specifically VED.

However, in his 2015 budget, then-chancellor George Osborne announced that a new road fund would be set up, whereby all funds raised through VED will go into the building and upkeep of Britain’s road system. This new system is due to be introduced before 2020.

The outgoing VED system, based on vehicle emissions, was introduced in 2001 as part of a push to reduce pollutants being released into the atmosphere. Vehicles emitting more pollutants cost more to tax, as part of efforts to persuade drivers to consider buying cleaner vehicles.

The system changes in April, which means significant differences for new car buyers.

How VED changes from April 2017

From 1 April the VED rules change rather dramatically. The 2015 budget announced that cars bought from April 1, 2017 will be subject to different costs.

Cars already on the road won’t be affected, just new cars, but the changes are significant. The current first year rate system gets a complete overhaul, and only zero-emissions cars will be exempt. Owners of higher-emitting new cars will pay a major premium compared to the current system, with a first year charge of up to £2,000.

After the first year, all cars will be subject to the same standard rate of £140 per year, no matter what the emissions (zero-emissions cars excepted). However, cars that cost more than £40,000 new will have a £310 premium added to that standard rate for five years, taking the annual cost after the first year to £450.

The new first year rate table looks like this:

If you’re buying a new car from April, the new VED system is one to study carefully, because the impact of tax on its running costs could be substantial. It's worth noting, though, that the changes only apply to cars registered after April 1 2017. The old system still applies to any car registered before this. 

See some examples of these changes at the end of this article.

OLDER VEHICLES

If your vehicle was registered before March 1, 2001, then the engine size in cubic centimetres (cc) is what’s important.

Cars with engines equal to or smaller in capacity than 1549cc (roughly equivalent to 1.5-litres) have to pay £145 a year, assuming they pay up front for 12 months.

Cars with engines larger than 1549cc will have to pay £235 a year.

The exact amount due can vary slightly, depending on whether you pay for six months or 12 months, and whether you pay all at once or in instalments. You can see a full breakdown of the charges by going to the DVLA website.

NEW VEHICLES

If your car is newer, and was registered on or after March 1, 2001, then it’s the emissions that you need to think about.

Petrol and diesel-powered cars are the most commonly taxed vehicles, and they’re categorised by bands that are determined by their CO2 emissions. Prices vary slightly depending on how you pay – in one go, or in instalments. We’ve listed the prices for paying for 12 months at once, but you can see the full breakdown by going to the Government’s VED website.

Petrol and diesel vehicles

*Includes cars that have a CO2 figure higher than 225g/km, but were registered before 23 March, 2006.

Alternative fuel vehicles

If your car is powered by an alternative fuelling system, then the charges are slightly different, but based on the same premise. Alternative fuel cars include hybrids and vehicles that run on biofuel or a variant of gas, such as LPG or CNG.

Once again the costs vary slightly depending on how you want to pay. The below prices are for 12 months VED paid up front and the full breakdown can be found here.

*Includes cars that have a CO2 figure higher than 225g/km, but were registered before 23 March, 2006.

TAXING FOR THE FIRST TIME

If your car is brand new and you’re taxing it for the first time, then the costs are slightly different again. The below prices are only applicable the first time a car is taxed – after that, it follows the tables above.

The system rewards drivers of new, low emitting cars with a lower-than-usual payment for the first year, but it smacks high-emitting vehicles with a fairly stiff initial charge.

The prices are for 12 months and are payable only in a single payment. A few bands – E, F and G for petrol, diesel and alternative fuel cars – qualify for six month payments, but the others do not. You can see further details here.

Petrol and diesel vehicles, first year only

Alternative fuel vehicles, first year only

Goods vehicles and motorbikes have their own VED system, which you can find more about here.

PAYMENT

Once you’ve figured out what you owe, you can pay your VED in a variety of ways.

The simplest method is online at https://www.gov.uk/vehicle-tax, using a credit or debit card. You’ll also need one or more of the following documents to hand:

The V11 reminder letter that was sent to you when your existing tax was running out

The car’s V5C registration document, which must be in your name

The V5C/2 new keeper supplement if you’ve just bought the car

The ‘last chance’ warning letter sent to you if you’re about to end up on the wrong side of the law for not either paying or declaring a SORN

If you’d rather use more traditional methods, you can pay over the phone by calling 0300 123 4321. There are charges for this call, which you can read about here.

You can also pay at any Post Office that can process vehicle tax. You’ll need to bring one of the following:

The V11 reminder letter that was sent to you when your existing tax was running out

The car’s V5C registration document, which must be in your name

The V5C/2 new keeper supplement if you’ve just bought the car

You may also need your MOT test certificate, valid for the start of the new tax period, and a valid Reduced Pollution Certificate if the vehicle has been modified to cut its emissions. In Northern Ireland, you’ll need to bring your insurance certificate or cover note.

EXEMPT VEHICLES 

From a financial point of view, the best position to be in is to be exempt from paying any VED, and if you’re in any of the following categories, you don’t have to pay anything. The following are exempt from car tax, and have been since before the changes took place:

 Vehicles used by a disabled person

 Vehicles registered before 1 January, 1977

 Electric vehicles

 Steam vehicles

 Mobility scooters

 Mowers

 Agricultural, horticultural and farming vehicles

If you own a car but you don’t drive it on public roads then you’re also exempt, although you’ll have to declare it to the DVLA. This is called a Statutory Off Road Notification, or SORN, and you can declare it here. Be aware that if you don’t let the DVLA know that you want the car registered as off the roads, you’ll be liable for road tax even if the car doesn’t move. Conversely, if you want to take the vehicle back onto public roads, you’ll need to pay the appropriate amount of VED first.

Unless you’re in the above categories you’ll have to pay. Well, almost – if your car is particularly green and emits less than 100 grams of carbon dioxide (CO2) per kilometre (g/km), then it is also exempt. But everyone else will need to cough up. 

How much you pay will depend on how old your car is. Older cars pay a rate that depends on their engine size, while the cost for newer cars depends on what kind of fuel they use and how much CO2 they emit.

THINGS TO NOTE

Unlike in the past, you don’t need to wait for a tax disc to be sent for display in the vehicle’s window – the tax disc system was abolished in 2014. 

It’s important to note that VED no longer transfers to a new owner when you sell or buy a car – the new owner will need to tax the car afresh, and they’ll need to do so before they drive the car.

Some examples using the new system: 

Hyundai Ioniq Electric

Price when new: £24,495, CO2 emissions: 0g/km

First year tax rate after 1st April 2017: £0

Tax rate after first year of ownership: £0

Tax cost across first three years: £0

Tesla Model X P100D

 

Price when new: £128,700, CO2 emissions: 0g/km

First year tax rate after 1st April 2017: £0

Tax rate after first year of ownership: £0, plus £310 Premium fee

Tax cost across first three years: £620

Mercedes-Benz C300h Sport Premium

Price when new: £40,010, CO2 emissions: 94g/km

First year tax rate after 1st April 2017: £120

Tax rate after first year of ownership: £450 (including £310 Premium fee)

Tax across first three years: £1020

Ford Mustang 5.0 V8 GT Convertible – with optional £795 metallic white paint

Price when new £40,040, CO2 emissions: 289g/km

First year tax rate after 1st April 2017: £2000

Tax rate after first year of ownership: £450

Tax across first three years: £2900

Lamborghini Aventador

Price when new: £260,040, CO2 emissions: 400g/km

First year tax rate after 1st April 2017: £2000

Tax rate after first year of ownership: £450

Tax across first three years: £2900

Phill Tromans

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Comments
26

5 October 2016
I guess this is why we need so many civil servants to administer needlessly complicated systems. All that's really needed is for road tax to be incorporated in the fuel duty tax. That way, the more fuel you use and the further you drive, the more tax you'd pay - and zero cost to administer.

5 October 2016
LP in Brighton wrote:

I guess this is why we need so many civil servants to administer needlessly complicated systems. All that's really needed is for road tax to be incorporated in the fuel duty tax. That way, the more fuel you use and the further you drive, the more tax you'd pay - AMD zero cost to administer.

Why would the government give up fixed income stream brought in by VED, an income that will come in regardless of oil prices / the economy etc. I know I wouldn't.

6 October 2016
LP in Brighton wrote:

I guess this is why we need so many civil servants to administer needlessly complicated systems. All that's really needed is for road tax to be incorporated in the fuel duty tax. That way, the more fuel you use and the further you drive, the more tax you'd pay - and zero cost to administer.

I honestly don't buy this argument. That's like saying you should pay more for the NHS if you use it more frequently than others. I can only imagine you dont do a long motorway commute (which, as it happens, are the roads that tend to need less maintenance).


"Work hard and be nice to people"

6 October 2016
Mini2 wrote:
LP in Brighton wrote:

I guess this is why we need so many civil servants to administer needlessly complicated systems. All that's really needed is for road tax to be incorporated in the fuel duty tax. That way, the more fuel you use and the further you drive, the more tax you'd pay - and zero cost to administer.

I honestly don't buy this argument. That's like saying you should pay more for the NHS if you use it more frequently than others. I can only imagine you dont do a long motorway commute (which, as it happens, are the roads that tend to need less maintenance).

No, it's nothing like the NHS. The NHS operates as an insurance scheme where one pays a premium according to one's earnings. LP says that VED should be paid for by usage. Your argument is tantamount to saying that a gallon of milk should cost the same as a pint, which is rubbish. If you buy/use more you pay more.

I don't need to put my name here, it's on the left

 

5 October 2016
money will start to be spent on new roads. HS2 looks to be a white elephant, how about using its route for a new motorway and let many more get the benefit. You could keep the high speed element and put a 90 mph limit on it. Call it HS M6 ;-)

5 October 2016
Thought they would penalise the young and elderly with the small cars tax of free or £20 or £30 so now the best value is something like a 2 litre diesel Evoque,Xf 5 series which will be about the same £141 or go for a mustang v8 that was £500 will be £141, fair enough the first years tax is a bit more.After 5 years second hand large cars will escape the surcharge.Ther ewill a aright mess arounfd £40000 when the surcharge kicks in for 5 years,I am told even met paint could put a car over the limit.So in five years or may be six it would be a grat idea to get a large diesel of that age .Not good for the environment .young or old nor the ordinary family guy.Just a _uckup.

5 October 2016
The new system is expensive for low emission vehicles and is bound to affect sales. My wife has a seat mii £20 ved, it was bought on a pcp and I am sure the dealer would be hoping to sell another when the pcp expires, however we shall not be buying another new car as £120 extra ved for each year on a low emission car that averages 5-6k per year is ridiculous. This is surely going to affect the sales of all low emission cars, hybrids, diesels etc

5 October 2016
Anyone see DVLA clamped cars? Loads of them in London. Anyone know what the fine is to get your car unclamped? Stupid buggers, serves them right.

5 October 2016
However I always fail to understand why people let VED be a major driving factor in a purchase. The cost is utterly insignificant compared to running costs and depreciation.

5 October 2016
If I were the government I would road tax based on competence. I mean, the embodied energy in something like a Vauxhall Astra is really significant. Yet each Astra produced is a total waste of the planets resources. It deserves to be taxed punitively. As does tat like the Ford Mustang. Good, decent cars can be taxed less.

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