A simples guide

A Guide to Car Road Tax

Confused by the road tax rules? Compare the Market can guide you through the maze and make sure you are informed and compliant.

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Car Road Tax guide

Car road tax is a necessary evil when you buy a car and you should factor the price into the running costs. It is technically known as VED (Vehicle Excise Duty)and can vary in cost, anywhere from nothing at all right through to £1,000 or more a year.

The price depends on the environmental credentials of your car and the greener the car, the less you will pay in tax. The rules will be changing in 2017, too, so make sure you know what is coming when you buy a car, because you don’t want to get caught out by a surprise bill next year.

Make sure you know about the procedure, too, as the old tax disc is no longer with us after 93 years of service. Every car is on the system and you need to know when it’s time to pay as a lot of people have been caught out and fined because they simply did not remember to renew their tax. 

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Which vehicles are car road tax (VED) exempt?

If you have a disability and drive on a regular basis, then your vehicle may be exempt from road tax, you must apply to have your road tax cost reduced. The standard disabled usage gives you a 50% discount. You need to be on the Higher Rate disability living allowance to qualify for complete exemption.

Disabled vehicles can range from a mobility scooter right through to a carer’s car. Mobility scooters, powered wheelchairs and invalid carriages must have a maximum speed of 8mph on roads and 4mph on pathways to be exempt from tax.

Any car made before 1st January 1975 is also exempt from road tax charges, so if you want to get creative with your running costs then you could go for an older car. Alternatively, you could choose a ride-on lawnmower, agricultural machinery or a steam-powered vehicle if you’re determined to avoid road tax (VED). But they might not be the most practical vehicles for daily use.

Electric cars are a far more practical option, with a variety of manufacturers offering battery-powered cars these days. Everything from the Renault Twizy to the Tesla Model S can give you a full discount on the road tax right now, although in 2017 the Tesla will get hit with a £310 surcharge. At present, low emissions hybrids also skirt road tax, but from next year only zero emissions cars will be completely exempt. 

How do I pay for car road tax (VED)?

Taxing your car used to involve a trip to the Post Office and you can still go there with your V11 reminder letter, registration document, new keeper supplement or your last chance warning letter.

If you go in person then you should take with you:

- Valid MOT certificate (if required)
- Reduced pollution certificate (if appropriate)
- Insurance Cover Note (Northern Ireland only)

You can, however, just tax your car online and arrange a monthly direct debit that effectively spreads the cost of your payments. You can do it within minutes and it’s a more convenient solution.

How will Car Road Tax (VED) change in 2017?

The system will undergo a complete change and the rules will be much simpler. Zero emissions cars will pay nothing at all. Other cars will pay a one-off charge for the first year and then move to a flat rate of £140. If your car emits more than 255g/km of CO2, you will have to pay a £2,000 fee for the first year’s car road tax (VED).

The rule changes don’t stop there, as any car that costs over £40,000, including Zero Emissions cars will incur an additional charge of £310 a year from the second year onwards.

This is designed to simplify the whole system, but it also ensnares hybrids in the flat rate and certainly goes a long way towards safeguarding the tax revenue.

Factor in the running costs

Along with car insurance, car road tax (VED) is just one part of the running costs that you really have to consider when you go looking for a new car. It’s closely related to the fuel economy in many cases, but you should really do the sums as the VED has a profound impact on the annual running costs of any car and if you don’t factor it in to your maths before you buy your next car.

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