You’d think two VW Golfs would pay the same car tax?
They might not – depending on when each car was first registered, what fuel it uses, and its engine size, you could be liable for anything from zero to £235 a year.
Car tax rates might be difficult to understand even to the experts!
If you are confused, don’t worry. You can use our car tax calculator to work out how much you need to pay. And on this page we’ve answered the questions car owners most often ask about car tax and how it works.
Table of Contents
Are car tax and road tax the same thing?
Yes there are!
Sometimes people call car tax ‘DVLA road tax’, because originally the money went into a fund to pay for new roads. That’s no longer the case.
You’ll also hear the words ‘vehicle excise duty’, ‘VED’, ‘vehicle tax’, and ‘DVLA tax’ – they all mean the same thing. Don’t worry, there is only one tax to pay! Find out how much you need to pay by using our car tax checker above.
How is car tax calculated?
You ask a simple question – “How much is my car tax?” Unfortunately it won’t get a simple answer. Working out how much your road tax costs is quite complicated.
First you have to know when your car was first registered. That tells you the basis on which you’ll have to tax your vehicle;
- before 1 March 2001 – engine size;
- March 2001 – March 2017 – carbon emissions;
- April 2017 onwards – carbon emissions in first year, then type of fuel + list price including options when new.
And yes, it’s got more complicated over the years!
Then you need to find out the right information to know your tax type.
- Older cars are easy – engines up to 1.49 litres pay less, 1.5 litres and over pay more.
- If your car is in the 2001-2017 contingent you’ll need to find out your carbon emissions (which should be shown on your logbook) to work out your DVLA car tax.
- If your car is more recent you need the fuel type and list price (unless you’re buying it new in which case, it’s carbon emissions you’ll need to find out the first year’s tax).
Find out in a few seconds only your vehicle tax with our road tax checker just above.
What’s the lowest rate of car tax and who pays it?
The lowest rate of car tax is zero. Several cars and drivers benefit from the zero rate of tax:
- Disabled drivers/car owners (if claiming certain benefits) are exempt from car tax, as are vehicles used by organisations providing transport for disabled people.
- Mobility scooters don’t pay any tax.
- Historic vehicles made before 1979 are exempt from car tax.
- Electric vehicles pay zero tax – unless they were first registered after 31 March 2017 and cost more than £40,000 when new.
- Cars registered between March 2001 and March 2017 which produce less than 100g/km of CO2 pay zero tax. These include the Hyundai i10 and Audi A3 as well as, believe it or not, the Jaguar XE!
What’s the highest rate of car tax?
The highest car tax is £2,135, for cars registered after 1 April 2019 which are in the highest CO2 emissions category (over 255g/km).
That rate of tax is only payable in the first year – when the car is registered for the first time. After the first year, the rate of tax dips. In future years, if the car’s worth more than £40,000, it would rack up £465 a year car tax (if it’s petrol or diesel). That’s a lot of money just to tax your car – you could buy a secondhand Ford Fiesta and still have a bit of change left!
What’s rather annoying is that if you spent more than £40,000 on an electric car, though you’d pay no tax at all in the first year, you’d end up paying £320 a year for the next five years. But if you bought a cheaper electric car, you’d still pay zero.
If you fancy a Tesla, the Model 3 starts with a £38,050 version, and goes up to £48,690 for the Model 3 Performance. If you don’t do a quick tax check first, you could end up paying £1,600 in extra car tax!
Why is car tax different between different models of the same car?
A VW Golf could pay a different rate of car tax from another, depending on:
- the date it was first registered – cars dating from before 2017 have a different tax regime;
- whether it’s an e-Golf, which would pay zero tax;
- for pre-2017 cars, the CO2 emissions of your particular model (can be anywhere from Band E to Band K).
If you’re considering buying a new car, check the rate of car tax online and make sure you quote the exact model – it could make a big difference.
Why is car tax so complicated?
The complexity of tax rates has emerged because it’s considered unfair to change the basis of tax retrospectively.
So if you bought your car in 1990 on the basis that it was in the lowest tax group, that should continue to be the case even though it’s 2020 now.
Originally, cars were taxed according to the size of the engine. It was really simple to tax a vehicle because there were only two different levels of tax, for engines below and above 1.5 litres. Cars registered before March 2001 still pay car tax on this basis.
But in 2001, as environmental concerns became more important, a new set of car tax bands was introduced. These relate the amount of tax paid to a car’s CO2 emissions. The ‘dirtier’ your car is, the higher the tax you pay. And if your car was first registered between 2001 and 2017, that’s still the basis you’ll be taxed on for your car.
But then in 2017 a new form of car tax replaced the UK tax bands. Cars registered for the first time after 31 March 2017 now pay a first year tax based on their carbon emissions, and further years based on their list price when new as well as the type of fuel.
Life is only simple if you have an all-electric car costing less than £40,000 new – you’ll pay zero tax under either regime!
Why did car tax change in 2017?
The big reason for changing the car tax system was that cars were becoming increasingly fuel efficient. This meant drivers who bought newer cars were buying taxed less than those running older cars.
As the proportion of new cars being sold in the lower tax bands increased, it also meant the government was getting less money. By charging extra tax on cars over £40,000, the new system raises more money from wealthier drivers.
How can I check if my car is taxed?
This is one of the few areas of car tax that’s really simple. You can check if a car is taxed by simply going to https://www.gov.uk/check-vehicle-tax for a DVLA tax check. All you need is the registration number. This car tax check only takes a couple of minutes.
Find out everything you need to know about taxing your car in our definitive guide on the subject.
The car tax checker is part of www.gov.uk/vehicle-tax where you can also tax your car online, as long as you have your car’s logbook or your DVLA reminder that you need to renew your car tax.
The road tax checker lets you check MOT and tax – if your MOT has expired, it will tell you, as well as telling you when your tax is next due.
Watch out if you’re buying a secondhand car, though. Asking “Is my car taxed?” may show it as taxed by the previous owner – but the tax can’t be transferred. You’ll need to tax it yourself before you drive it away. On the other hand, knowing the MOT status is very useful. (You might also want to use Mycarcheck to check other basic facts – you get a basic car check free, but it’s worth paying to check the car’s not stolen or a write-off.)
Can I get a car tax refund if I sell my car?
If you have any full months of car tax left, you’ll get a refund.
When you pay road tax you pay either for six months or for the year (it’s cheaper to pay annually). If you sell your car (or it’s exported, stolen or scrapped), then you’ll get a refund of any full months that are left on your tax. The refund is handled automatically as soon as you notify DVLA that your car has been sold, or is otherwise no longer liable to pay tax.
But you won’t get a refund:
- of any credit card fees,
- of the 5% surcharge on some direct debit payments, or
- of the 10% surcharge for the six monthly payment, on any part-months, even if you’ve got 29 days left.
You can also get a refund if you store your car off the road – for instance put it in a garage while you’re working abroad for six months – and give DVLA a SORN (Statutory Off-Road Notification). But when you want to drive it again, you’ll need to tax the car.
What else do I need to tax my car?
There are two other requirements you’ll need to meet to tax a car.
- Your car needs to be insured. You can check your insurance on askMID (askmid.com).
- If your car’s more than three years old it needs a valid MOT certificate. You can check this at https://cartaxcheck.co.uk/mot-check/.
It’s really easy to check tax and MOT online as well as your insurance, so make sure everything’s in order and avoid getting fined for not paying your tax.
How does tax work on a company car?
Company cars are taxed two ways.
- They pay car tax just like any other car.
- You’ll be taxed on the benefit of having the car, as well.
The second kind of tax is part of your income tax calculation. Your ‘income’ is set at a percentage of the car’s P11D value, that is, the list price including VAT and optional extras. That percentage varies from 16% to 37% depending on the car’s CO2 emissions. You’ll then be taxed on that income at your marginal rate of tax.
Like other car taxes, this is quite complicated to work out so you’re best off using a company car tax calculator. But it has nothing to do with your DVLA tax – it’s part of your income tax and handled by the Inland Revenue.