Your need-to-know guide to car tax rule changes
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.
New Car Tax Rates: The Facts Explained
|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 £2,070.|
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 2018. So the good news is that if you own a car already, there is no change to your car tax.|
What you pay from 1 April 2018
The revised rates will apply tax to all new cars with CO2 emissions of 1g/km or more from 1 April 2018.
|CO2 emissions band (G/KM)||First year rate||Rate from second year|
|Diesel cars (not meeting the RDE2 standard)||
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.
Will you have to pay the £310 car tax premium? More about the £40,000 threshold
But does it mean you won’t be getting that new car?
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.