Here’s Everything YOU Need To Know About UK Car Tax

Car Tax, Road Tax

Car tax got you in a twist? Don’t worry, we’ve got you! We’ve put together this handy guide to cover everything you need to know about UK car tax.

The Vehicle Excise Duty (VED) system, commonly known as road tax, has experienced significant changes over the past three years affecting motorists who are both purchasing new registration vehicles and those who own vehicles already registered on UK roads.

Given the sheer volume of vehicles registered on UK roads it is important to understand the significant impact that minor road tax changes can have upon the amount lost or gained by the Treasury.

We have outlined the changes made between 2017 and 2019 below. Don’t worry, we will go into greater detail as you delve further into this guide to ensure you are clued up on how car tax changes affect you.

2017 Car Tax Changes

The first significant changes came into effect in April 2017 with the introduction of standard flat rates for new registrations, overhauling the old CO2 based system. These changes were made to counteract losses in Treasury revenue as vehicle manufacturers produced increasingly more environmentally friendly models.

2018 Car Tax Changes

There were two significant changes in 2018, the first saw diesel vehicles move up a VED band and the second – welcome news for motorists – saw the Chancellor announce that all road tax would be put directly back into maintaining and developing UK roads. In-spite of first being promised back in 2015 this isn’t set to take effect until 2020.

2019 Car Tax Changes

In result of a rise in inflation extra road tax charges were announced in the Autumn 2018 Budget. Also announced were extra supplement charges for luxury vehicles (costing more than £40,000 after options). These changes are set to take effect from 1^st April onwards and include all vehicles  

We all know what you’re thinking “All this information is useful but how will these changes affect me?” Well…

How Much Will It Cost To Tax My Car?

The amount you pay is determined by when the car was bought as the vehicle tax system isn’t applied retroactively. The only exception to this rule is inflationary increases.

If you are buying a new vehicle the amount of tax you will pay is based on the VED system introduced in 2017, updated in 2018 and soon to be updated in 2019. This system has been explained in greater detail below with focus placed upon first-year rates and annual rates.

First-Year Rates, Annual Rates and Luxury Vehicles

The first year of car tax is based upon C02 emissions and is included in the vehicle’s on the road (OTR) price.

If you are purchasing a diesel vehicle you’ll be paying one band up following 2018 changes. The government announced that diesel vehicles will pay the same rate as equivalent petrol vehicles, providing they can meet RDE2 emissions standards. However, as these standards are yet to be announced diesel owners will pay a band higher for the time being.

Motorists with diesel or petrol vehicles need to pay an annual flat rate of £140. Those who own more environmentally friendly vehicles such as hybrids or electronic vehicles (EVs) receive a £10 discount and need to pay £130.

Luxury vehicles costing £40,000 or more (after options) are subjected to a supplementary charge of £310 that needs to be paid annually for five years. This charge only takes effect after the first year rate has passed. Therefore, if you are buying a new vehicle that comes in at £40,000 or higher you’ll be paying £450 in tax for five years. After the sixth year you’ll pay only the standard rate - £140 for petrol and diesel vehicles and £130 for EVs.

If you are haggling the price of a vehicle at £40,000 or higher you will still be required to pay the supplementary charge. This also applies to luxury EVs.

We understand this may be very confusing! We’ve broken down how much you will pay now and post 1^st April 2019.

Road Tax Breakdown

We’ve broken down how much you will pay annually under the current tax system and the updated system set to be introduced on 1^st April 2019.

Costs under the current system can be seen below along with the updated system costs in brackets.

Cars above £40,000 pay £310 as an annual supplement between years two and five under the current system. This is set to increase to £320 from 1^st April 2019.

Car Tax For Older Cars

If your car was registered between 2001 and April 2017 don’t worry! As mentioned earlier in this guide road tax changes aren’t applied retroactively. Therefore, you will pay the same cost for the rest of the vehicle’s life (even after being SORN).

These tax changes don’t apply to vehicles that fall under light commercial vehicle (LCV) tax, which includes vans and pick-ups. Currently, LCV tax is set at £240 annually, although this is subject to change.

We’ve broken down car tax payments using the old CO2 emissions system below. Please note, the annual rate is subjected to inflation increases from 1^st April 2019.

*The K band rate also applies to vehicles registered before 23^rd March 2006 and have emissions greater than 225 g/km.

Car Tax For Pre-2001 Cars

If you own a car that was registered before 1^st March 2001 you will need to pay tax using a far simpler system based upon engine capacity. If your car has a capacity over 1549cc you pay £245. For cars with a capacity below 1549cc you pay £150.

Classic Car Tax

If you own a classic car or motorbike registered before 1^st January 1977 you can apply for vehicle tax exemption. This exemption has been designed on a rolling basis including 1978, 1979 and so on each year.

The easiest way to apply for vehicle tax exemption is to pop down to your local post office with your logbook (V5C), proof of insurance and a valid MoT. The Post Office will send your V5C off to the DVLA who will amend the documentation and get it back to you within 10 working days. Whilst this is going on you’ll still be able to use your classic car as normal.

Pay Car Tax

You can pay your car tax for 6 or 12 months up front or monthly using Direct Debit. The latter will mean the tax hit is lessened – especially valuable if you own a vehicle with high C02 emissions! Please note, if you are paying monthly you will be subject to a 5% surcharge.

Currently, you will still receive a traditional tax reminder through the door but the easiest way to find out when your tax is due or to make a payment is to visit the vehicle tax area of the Government website.

Road Tax Selling A Car

Unlike days gone by road tax is not linked to the vehicle itself. Therefore, if you are selling a car the new owner will need to pay to re-tax the car. You can apply for a tax refund for any tax remaining on the vehicle.

If you are selling a car your tax refund will be issued once the DVLA receives notification that the car has been sold, scrapped, exported or SORN. If you fail to notify the DVLA of any change of ownership you face a £1000 fine and may also be liable for any speeding or parking fines picked up by the new owner.

Road tax is a far from simple area! That said, we hope this guide has given you more confidence and understanding on the subject.

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