Car Tax Explained

If you’re new to driving or you’ve recently changed vehicles, getting your head around car tax can be difficult at first. 

Car tax is sometimes referred to as road tax or VED and can significantly add to the cost of car ownership. How much you pay depends on your vehicle and how environmentally-friendly it is.        

Read on if you want to find out how car tax rates are calculated and how you can use online resources to work out the cost of car tax for any vehicle. 

Taxing a car 

If your car is registered in the UK, the chances are you’ll be legally obliged to tax it. There are exceptions to the rule, but most cars used on British public roads must be taxed. 

When choosing a car, it makes sense to look at the cost of taxing it before you shell out. Some cars cost considerably less than others and these cars are more attractive to other buyers so you’ll have more chance of selling when you want to buy a different one. 

Car tax exemptions 

Not all cars have to be taxed. If you keep your car off road and you have no intention of using it, you don’t need to tax it, but you will have to inform the DVLA via a statutory off road notice (SORN). 

If you own a car that falls into tax band A such as the VW e-up electric car, you’re exempt from paying tax, as are owners of brand new (up to one year) cars that fall into tax bands B to D. Once the car is more than one-year-old, it will require tax unless it’s off-road. 

Drivers with a disability can also be exempt if they receive the higher rate of the mobility component of Disability Living Allowance, or they receive War Pensioner’s Mobility Supplement, or they have an invalid carriage. 

Vehicles made before 1974 are also exempt from tax. 

How much does car tax cost? 

The cost of car tax varies from £0 to over £1000 and is decided by the band your car falls into. Each band represents a different level of C02 emissions and the rates are based on how many grams of carbon dioxide (C02) a car produces per kilometre. 

For cars registered on or after 1 March 2001, car tax works out as follows: 

*Includes cars registered before 23 March 2006 with a CO2 figure of 225g/km or higher.

If your car is in its first year and falls into band H or lower the first year of car tax will cost more. 

Help working out your car tax 

If you need more help working out the cost of your car tax, try this handy car costs calculator. 



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