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Understand the changes to your car tax band

Understand the changes to your car tax band

UK road tax underwent some major changes in April 2017. But to complicate things further, additional rules for diesel cars were made in April 2018.

If you’re feeling confused, our guide explains the changes to your car tax band so you can find out exactly how much road tax you’ll need to pay.

Daniel Hutson
From the Motor team
minute read
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Posted 13 JULY 2020

What is car road tax?

Car road tax, officially known as Vehicle Excise Duty (VED), is a tax charged on nearly all cars that are driven, or kept, on public roads.

How is VED calculated?

For cars first registered before 1 March 2001, VED is based on engine size – under 1549cc: £155 and over 1549cc: £255.

For cars registered on or after 1 March 2001, VED is based on the CO2 emissions and the fuel type of a new car in the first year it’s registered. After that a standard rate is applied from the second year onwards, regardless of its CO2 emissions.

CO2 emissions are measured in the number of grams released into the atmosphere per kilometre (g/km). You can find out how much your car emits on its V5C registration certificate in your logbook, or on the Vehicle Certification Agency website.

The amount of tax you’ll pay depends on when your car was registered for the first time (and not when you became the owner if you bought a used car).

What are the car tax bands as of April 2018?

Depending on its first registration date, your car will now fall into one of three VED systems:

1. Cars first registered between 1 March 2001 and 31 March 2017

  • Your car will be put into one of 13 tax bands depending on its CO2 emissions. The bands are lettered from A (less than 100 g/km) to M (over 255 g/km)
  • The higher your car’s CO2 emissions, the more VED you’ll have to pay. If your car is in band A, you won’t have to pay anything. If it’s in band M, you’ll pay £555 in annual road tax
  • You can check the cost per band on the Gov.UK tax rate tables.

2. Cars first registered from 1 April 2017

  • For cars first registered on or after 1 April 2017, there’ll be a first-year rate based on their CO2 emissions, then a standard annual rate of £140 for the subsequent years.
  • Low emission cars (hybrids, bioethanol and liquid petroleum gas) are no longer exempt from paying VED. They will pay £10 less than petrol cars in the first year, then £130 for the subsequent years.
  • New cars that cost over £40,000 will also be charged an additional £310 on top of the standard rate for a further five years.

3. Car first registered from 1 April 2018

  • The rate for the first year is based on the CO2 emissions of the vehicle.
  • First year rates have increased for all cars first registered on or after 1 April 2018.
  • The £40,000 rule applies to all fuel types including zero-emission cars. So, if you buy an electric car that costs more than £40,000, you’ll pay nothing in the first year, then £310 for the next five years.
  • If you buy a new diesel car that doesn’t comply with RDE2 emission testing you’ll have to pay a higher amount of VED in the first year. This doesn’t apply to diesel cars first registered before 1 April 2018.
  • After the first year, all petrol and diesel cars will pay an annual VED rate of £140.

The new rules are not backdated, so older cars will only need to comply with the previous tax system.

Here's a look at the first year VED rates for petrol and diesel cars from April 2018

CO2 Emissions (g/km) First-year rate for petrol and RDE2 compliant diesel cars First-year rate for other diesel cars
0 £0 £0
1-50 £10 £25
51-75 £25 £105
76-90 £105 £125
91-100 £125 £145
101-110 £145 £165
111-130 £165 £205
131-150 £205 £515
151-170 £515 £830
171-190 £830 £1,240
191-225 £1,240 £1,760
226-255 £1,760 £2,070
Over 255 £2,070 £2,070

Which vehicles are exempt?

The following types of vehicle are exempt from VED, although you still need to apply for VED even if you don’t need to pay anything:

  • Electric vehicles under £40,000 – to be exempt, the electricity must come from an external source or an electric storage battery not connected to any source of power when the vehicle is moving. Your electric car must also cost less than £40,000 when new.
  • Disabled vehicles – if you have a disability you may be exempt from paying VED, although you’ll still have to apply for it. Find out if you’re eligible for VED tax exemption on the Gov.UK website.
  • Classic vehicles – if your vehicle is more than 40 years old, it will be considered a classic car, and will be exempt from paying VED.
  • SORN vehicles – if you’ve declared your car off the road and have a Statutory Off Road Notice (SORN), you won’t need to tax or insure your car, and you may be due a car tax refund. Just make sure your car is kept on private land, or in a garage, and is not driven or parked on a public road.

How do I pay for VED?

You can pay for VED online or at the Post Office. You’ll need a reference number from either:

  • A recent reminder (V11) from the DVLA
  • Your vehicle logbook (V5C)
  • The green ‘new keeper’s slip (V5C/2) from the logbook if you’ve just bought the car

If you’re paying at the Post Office, you’ll also need a valid MOT certificate if the vehicle is more than three years old.

How can I keep my car costs down?

While you can’t control the cost of VED or other car running costs such as repairs and fuel, there are ways to reduce the cost of your car insurance.

And by simply comparing car insurance with us, you could save up to £289** on your premium.

**Based on Online independent research by Consumer Intelligence during May 2020 50% of customers could save up to £289.85 on their car insurance premium.

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