Please note: This article relates to changes introduced on 1 April 2017. There are some new changes for 2018 which we will bring you soon. Last update: 12 Feb 2018.
Whether you know it as car tax, road tax or Vehicle Excise Duty (VED), it's something all car and van owners in the UK must pay.
|Year 1 of ownership||New cars are divided into 13 different C02 bands to determine how much you'll pay in the first year of ownership, from £0 to £2,000.|
Year 2 onwards
(cars under £40,000)
|If your car's list price is less than £40,000, you'll pay a standard rate or £140 per year from the second year of ownership.|
Year 2 - 6
(cars over £40,000)
|If your car's list price is £40,000 or more, you'll be charged a premium of £310 in addition to the standard rate - a total cost of £450 per year - payable for 5 years after the first year of ownership (i.e. from the second to the sixth year of a car's life).|
|Zero emission cars worth less than £40,000 don't incur any VED. However, if your car's list price exceeds £40,000, you'll be charged the £310 supplement, even if it falls into the zero emission category.|
|Already own your car?||No one will pay more for a car they already own. The new rates only apply to new cars sold and registered on or after 1 April 2017. So the good news is that if you own a car already, there is no change to your car tax.|
The revised 2017 rates that came into force on 1 April will apply tax to all new cars with CO2 emissions of 1g/km or more. The bottom line? If you purchased a new car on or after 1 April 2017, it will be almost impossible to avoid paying VED.
|CO2 Emissions Band (G/KM)||First Year Rate||Rate from Second Year|
Cars costing < £40,000
Second year onwards
Cars costing £40,000+
|* Cars above £40,000 pay £310 annual supplement for five years after the first year|
Source: GOV.UK (2016). HMRC Policy Paper 2015: Vehicle Excise Duty.
Low CO2 emissions won’t necessarily mean lower car tax…
Exempt from car tax as under £40,000
Increase of £45 over 3 years
Fiat 124 Spider
1.4 Multiair Classica 2dr convertible
Tax over 3 years at current rate: £435
Tax over 3 years from 2017: £480
Increase of £380 over 3 years
1.6TDI BMT 110 StopStart BlueMotion
Tax over 3 years at current rate: £0
Tax over 3 years from 2017: £380
Increase of £900 over 3 years
Land Rover Discovery
3.0 SDV6 SE
Tax over 3 years at current rate: £1,220
Tax over 3 years from 2017: £2,100
You could save money by considering a lease car. That’s because a good car leasing company will usually include VED in your monthly rental charge.
|VED band||CO2 emissions (g/km)||First-year rate||Standard rate||First-year rate (Green car)||Standard rate (Green car)|