How is Road Tax Calculated?

All vehicles registered in the UK and driven or kept on a public road need to have road tax (also known as car tax or, more formally, Vehicle Excise Duty) paid on them. It's a major running cost for a car, and one that should be factored into the decision of which vehicle to buy. The car you choose can make a big difference to how much you spend on road tax, and a low-tax vehicle may hold its value better. People think of it as one tax – the disc that used to go in the windscreen back in the analogue days. But the calculation is complicated, with four different systems and bands for cars. Classic Car Road Tax applies to cars more than 40 years old, and there are different bands for cars registered before 2001, between 2001 and 2017, and after 2017.

How is road tax calculated

Cars exempt from road tax

You’ll pay zero car tax if you own a brand new car that produces no CO2 (in practice, that means a pure electric vehicle) and costs less than £40,000. Cars registered between 1 March 2001 and 1 April 2017 don’t need to have tax paid on them if they produce 100 grams or less of CO2 per kilometre. People with disabilities can get free car tax if they receive the higher rate of the mobility component of Disability Living Allowance, have an invalid carriage such as a mobility scooter, or receive the War Pensioners’ Mobility Supplement. If your car was produced (rather than registered) more than 40 years ago, you can apply for free car tax, so long as it’s not used commercially.

Cars registered after 2017 – under £40,000

For cars registered after 2017, the tax you pay in the first year depends on how much CO2 the vehicle emits. Petrol cars and diesel cars that meet the RDE2 (Real Driving Emissions 2) standard and emit less than 50 g/km will pay £10, whereas cars that emit more than 255 g/km will be slapped with a road tax bill of £2,245. There is a sliding scale between those two figures, based on emissions, and slightly lower rates apply to cars powered by alternative fuels such as biodiesel.

The full breakdown is available on the government’s website. From the second year, the payment for petrol or diesel cars is £155 annually, £162.75 split into 12 monthly direct debit payments or £85.25 (£81.38 by direct debit) for a single monthly payment. The figures for alternative fuel cars are £145, £152.25 and £79.95 (£76.13) respectively.

Cars registered after 2017 – over £40,000

Cars or motorhomes with a list price of more than £40,000 attract an extra £335 a year in road tax. You’ll need to pay this rate for five years from the second time the vehicle is taxed.

How is road tax calculated

Cars registered between 1 March 2001 and 31 March 2017

Petrol and diesel cars registered in this period are taxed according to their CO2 emissions, with zero tax on cars emitting less than 100 g/km, £600 a year payable on cars emitting more than 255 g/km and a sliding scale in between. Cars registered before 23 March 2006 are taxed at a maximum of £340 a year. As with newer cars, vehicles running on alternative fuels attract slightly cheaper rates. All rates are slightly higher if you want to split the annual cost into two six-monthly or 12 monthly payments.

Cars registered before 1 March 2001

The calculation for these vehicles is simple, with a 12-month rate of £170 for vehicles with an engine below 1,549 cc and £280 for engines larger than that.

Road tax is not transferrable

Vehicle tax is no longer transferred when vehicles are bought and sold. If you buy a vehicle, you’ll need to tax it before you can drive it. If you sell a vehicle with full months left that you’ve paid tax for, you can claim a refund. This will be issued automatically when you return the selling or transferring a vehicle section of the VC5 logbook to the DVLA (or fill in the corresponding online form).

Statutory off-road notification

One further point worth noting is that if you’re keeping a vehicle off the road and you want to stop taxing and insuring it, you need to make a Statutory Off-Road Notification (SORN). It’s simple to apply for this online, by phone or by post. It’s important to bear in mind that it’s now illegal to keep a vehicle taxed if it has no insurance.

How much road tax you’ll need to pay depends on how old your car is, how much CO2 it emits and how much it’s worth. Check your car’s CO2 emissions on the government website, manufacturers’ websites or online databases to figure out how much you’ll need to pay. Even if you’re eligible for free car tax, don’t forget to apply for it – tens of thousands of drivers are fined every year for failing to do just that.

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