A simples guide

A guide to car tax bands

You may have heard talk of car tax and car tax bands. You may be wondering how they’re calculated and how much it actually costs. Here, we’ll fill you in on everything you need to know about such things.

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What are car tax bands?

Car tax, or Vehicle Excise Duty (VED), to give it its official title is a tax levied on almost all vehicles by central government.

Since 2001, all cars have been allocated a tax band letter from A to M, where A refers to cars emitting the lowest levels of CO2 and M the highest. There are two rates of tax for each band, a rate for the first year following purchase, and a rate for subsequent years.

Historically the government has claimed to be incentivising the purchase of lower emission vehicles by levying a lower rate for cars in band A and then scaling up the charge to band M.

How are they calculated?

Petrol and diesel cars emit CO2 when they burn fuel. These emissions have been widely blamed for global warming and the buildup of so called greenhouse gasses.

Every new car is released with CO2 emission figures which are listed in g/km, that’s how many grams of CO2 they release for every kilometre they drive.

car and money
car and sunset

What are current rates?

For the period until the end of March 2017, the rates are shown in the table below. As you can see there has been a healthy tax incentive to purchase a new car emitting 120 mg or less per km.

Driving an environmentally friendly group C car would cost you only £150 in car tax over 5 years for example, while a group M car would cost you over £3,000.

Current (pre-April 2017) vehicle VED tax bands

CO2 Emissions in g/km (tax band) First year rate Annual rate
Up to 100 (A) £0 £0
101 - 110 (B) £0 £20
111 - 120 (C) £0 £30
121 - 130 (D) £0 £110
131 - 140 (E) £130 £130
141 - 150 (F) £145 £145
151 - 165 (G) £180 £180
166 - 175 (H) £295 £205
176 - 185 (I) £350 £225
186 - 200 (J) £490 £265
201 - 225 (K) £640 £290
226 - 255 (L) £870 £490
Over 255 (M) £1,100 £505
car wheel and sunset

What's changing?

From April 2017 however, the Chancellor has introduced new rates that will significantly reduce the tax incentive to drive a more fuel efficient vehicle and have actually made it cheaper in the medium term to drive a less efficient one than it costs today.

Taking the figures from the new rates as shown in the table below and using the same example gives quite different results.

From April, instead of paying just £150 over five years for a group C car, a driver purchasing such a vehicle will pay £160 in the first year alone followed by £140 a year for the next four years giving a total bill of £720, a 380% increase.

However, buying a car that emits 255mg/km, the old Group M, will now cost £2,000 in the first year and the identical £140 for the following four years, giving a total bill of £2,560, actually a 15% reduction over the cost if brought today.

Only if the new vehicle costs more than £40,000 will fuel hungry vehicles cost more in the medium term as they will attract a supplementary charge of £310 for each of the first five years.

VED tax bands: April 2017 onwards

Emissions (g/km of CO2)  First year rate 
0 £10
1 - 50 £10
51 - 75 £25
76 - 90 £100
91 - 100 £120
101 - 110 £140
111 - 130 £160
131 - 150 £200
151 - 170 £500
171 - 190 £800
191 - 225 £1,200
226 - 255 £1,700
Over 255 £2,000

Cars above £40,000 pay £310 annual supplement for five years

hand on steering wheel

Are there any exemptions?

Genuine zero emission vehicles are and will remain tax free.

If you’re disabled you may be able to apply for disability exemption based on government rules, and vehicles used by organisations providing transport for disabled people are exempt.

Otherwise unless your vehicle was made before January 1976 or is powered by steam, we’re afraid the answer is no.

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