Car tax bands: a complete guide to car tax

*Cars with a list price of over £40,000 when new pay an additional rate of £390 per year on top of the standard rate, for five years. The five-year time limit starts from the second year the car is first registered. 

What is car tax or VED and why do I have to pay it?

Vehicle Excise Duty (VED) – also known as car tax or road tax – is essentially a tax for using a vehicle on public roads in the UK.

It was introduced in 1937 and replaced the old system of road tax, which traces its roots back to the taxation of Hackney Carriages in the 17th century.

The tax disc was introduced in 1921 and, until 1974, car taxation was handled by local authorities.

Then, in 1974, the DVLC (Driver and Licensing Vehicle Centre) was established, with an office in Swansea handling all vehicle and driver registration issues. The DVLC later became the DVLA (Driver and Vehicle Licensing Agency) and the tax disc was abolished in 2014. 

Each year, the DVLA collects around £5 billion in VED, but not all of this is spent on road improvements and infrastructure. In fact, VED is grouped in with other forms of tax, meaning the income from your road tax is just as likely to be spent on education or healthcare as it is on roads.

How is car tax monitored?

Since October 2014, when the DVLA consigned the tax disc to the history books, motorists are no longer required to display a paper disc in the windscreen.

Instead, VED is handled by an electronic database, as the government continues to digitise public services.

Today, instead of physically checking the tax disc, the police and other law enforcement agencies use a network of Automatic Number Plate Recognition (ANPR) cameras.

These cameras might be situated at the roadside, or located in a police vehicle.

The ANPR system exchanges data with the DVLA database which keeps a record of all taxed and untaxed vehicles.

When do you have to pay your car tax?

If you own a vehicle, you will automatically receive a reminder before the tax is due to expire, which is always at the end of a given month.

In other words, if your vehicle is taxed for 12 months from 1 January, you’ll need to renew before the end of December.

You can tax a car for six or 12 months.

You’re also liable for road tax as soon as you take ownership of a car, although if you’re buying an efficient new vehicle, this might cost less than you think. In fact, buy wisely and you might pay nothing at all.

How much do I have to pay for my car tax?

How much you have to pay depends on age of your car and the tax band it is in, use the tables in the tax bands explained section to find out how much you will have to pay for your car.

How do you pay for my car tax?

By far the easiest way to pay for road tax is to do it online.

You’ll need a reference number from one of the following documents: a recent reminder (V11), ‘last chance’ warning letter from the DVLA, vehicle logbook (V5C) in your name, or a green, new keeper supplement (V5C/2) from a logbook of a car you’ve just bought.

The system is extremely easy, and you can pay via debit card, credit card or direct debit.

Note, additional charges apply if you pay via direct debit.

If you’d rather not pay online, you can telephone the DVLA’s 24-hour service on 0300 123 4321, although direct debit is not an option over the phone.

Alternatively, for something a little more old-school, you can tax a vehicle at a Post Office that deals with vehicle tax.

What happens if you don’t tax my car?

If you’re the registered keeper of an untaxed vehicle, you’ll be issued with a Late Licensing Penalty (LLP) letter.

The fine is £80, but this can be reduced to £40 if you pay within 33 days. If you fail to pay, the case will be referred to a debt collection agency.

Anyone caught using or keeping an untaxed vehicle without a SORN (Statutory Off Road Notification)* will be issued with an Out of Court Settlement (OCS) letter.

The OCS is set at £30 plus one-and-a-half times the outstanding vehicle tax rate.

If this is not paid, the case may be pursued via a magistrates’ court, with a penalty of £1,000 or five times the amount chargeable (whichever is greater).

This penalty increases to £2,500 if you’re caught using or keeping an untaxed vehicle on a public road with a SORN in place.

In both cases, the vehicle might be clamped, and a £100 clamp release fee will be payable within the first 24 hours.

If the vehicle is removed, the fee increases to £200, along with a £21 per day storage fee beginning once the vehicle has been removed to the vehicle pound.

Driving without car tax, can lead to serious consequences – with a fine up to £1000. Now that the disc is now longer in use, the police use a network of Automatic Number Plate Recognition (ANPR) cameras to check if a car is taxed.

If a car that is not taxed is abandoned, the vehicle is stored for a period between 7 and 14 days, at which point it might be disposed of at auction, broken for spares, or crushed.

*You need to make a SORN when you take a vehicle ‘off the road’ and you want to stop taxing and insuring it.

Car tax exemptions

The following vehicles are exempt from vehicle tax, although you’ll still need to apply for it:

• Vehicles used by a disabled person
• Disabled passenger vehicles
• Mobility scooters, powered wheelchairs and invalid carriages
• Historic vehicles built more than 40 years before 1 January of the current year
• Electric vehicles
• Mowing machines
• Steam vehicles
• Vehicles used just for agriculture, horticulture, and forestry

For cars registered on or after 1 March 2001, the system is a little more complex, but the option to pay via direct debit remains.

What happens to your road tax when you sell your car?

Don’t be caught out by the changes to the system when buying a new car, introduced in October 2014.

Since then, it has not been possible to transfer any unexpired tax to the new registered keeper, meaning a new owner must tax the car before driving away.

Similarly, if you’re selling the vehicle, be sure to let the DVLA know. Any remaining tax will be refunded to you.

FAQs

What are VED rates?

VED stands for Vehicle Excise Duty, and it is a yearly tax paid by the owners of cars, motorbikes, vans, and other motor vehicles registered in the UK.

It is also known as road tax or car tax. VED rates are the amount of money paid by the vehicle owner to the government, depending on the type and age of the vehicle. The amount of VED paid depends on the type of vehicle and its age.

It should be noted that some vehicles are exempt from paying VED, such as electric cars, classic cars, and vehicles used for disabled people. VED rates are set by the government and are subject to change.

For the latest rates, vehicle owners should check the government website.

How is VED calculated?

VED, or Vehicle Excise Duty is a tax placed on vehicle owners to help fund road maintenance, research, and public transport. The amount of VED you pay is based on the type of vehicle you drive and the type of fuel it uses.

Generally, the more emissions a vehicle produces, the more VED you will pay. For cars registered after 1st March 2001, the VED is calculated by taking into account the vehicle’s CO2 emissions. This information is taken from the manufacturer’s CO2 emissions figures and is then broken down into different bands.

The bands range from A (the lowest) to M (the highest) and are based on the amount of CO2 emitted per kilometre (g/km). For cars registered before 1st March 2001, VED is calculated by taking into consideration the engine size.

The amount of VED you pay will depend on the age of your vehicle, the type of fuel it uses, and the CO2 emissions or engine size. The VED rates can be found on the Government website.

It is important to note that VED rates can change from year to year, so it is important to check the latest rates before you buy a car.