Whether you know it as car tax, road tax, or by its actual name, Vehicle Excise Duty (VED), paying tax is a necessary part of owning a vehicle - just like taking out car insurance or getting a regular service.
But what is it, how much does it cost, and what documents do you need to tax your car? We’re here to explain.
What is car tax?
Drivers must buy car tax every year. The money this raises is paid directly into the central government fund, which is used for projects that benefit everyone – including road work and maintenance.
How much is my car tax?
The price of car tax varies with the age and how polluting it is being the two primary factors in determining your car tax banding.
Some cars, such as electric vehicles (EVs) and certain classics, are tax exempt (and pay nothing), while others can be charged several hundred pounds per year.
Penalties on more polluting cars are there to encourage ownership of less polluting vehicles, like smaller cars, hybrids and EVs.
The cost of road tax also depends on when the car was registered:
- Cars more than 40 years old are exempt
- Before 1 March 2001: taxed on engine size
- Between 1 March 2001 and 1 April 2017: taxed on the car's official CO2 emissions
- On or after 1 April 2017: just the first year rate is based on CO2
Cars registered from 1 March 2001 to 31 March 2017
Emissions-based vehicle taxation first came into place in 2001. When changes came into effect in April 2017, all cars registered previously had their tax frozen.
New cars
If you buy a new car, the cost of road tax follows the system introduced on 1 April 2017.
The first 12 months is based on emissions, and the following years are a flat rate.
The first year of tax is included in the on-the-road price, but the second year is what you'll pay out of pocket.
In 2019, VED increased in line with inflation via the Retail Price Index (RPI). To calculate road tax and find out how much tax you'll pay, visit the GOV website.
Diesel car tax changes April 2018
In the 2017 Autumn Budget, HM Treasury revealed a new tier of taxation for new diesel cars that don’t meet the latest Euro 6 emissions legislation.
The cost varies depending on whether you have a ‘cleaner’ diesel car or an older one.
New cars that don’t comply to Euro 6 emissions see a tax increase. Cars with more than 0g/km carbon emissions and/or cost more than £40,000 are also taxable.
What do I need to tax my car?
Since tax discs were abolished in 2014, it can be difficult to remember when your tax is due.
Some garages offer a yearly reminder service when you get a MOT done so it’s a good indication that your tax is probably due too.
You can also use the online DVLA road tax check service – you’ll need the car registration to find out if there’s valid tax in place.
The documents you need to tax a car vary depending on whether the car is brand new or not.
If you’re renewing car tax, or taxing a used car for the first time
You can buy or renew car tax online or over the phone if you have a copy of the logbook in your name, a reminder letter from the DVLA, or the ‘new keeper supplement’ (green slip). You’ll need to provide a few details from the slip.
The DVLA will then search all the official databases to ensure that the car has a valid MOT and insurance in place. If the car doesn’t have either of these, you won’t be able to buy tax.
Speak to your car insurer at least the day before, and they can ensure the database is updated with your new car details.
There’s no ‘grace period’ in which you can arrange tax after buying a used car, so you should have car tax in place before driving away. Any reputable second-hand car dealer should offer to help arrange your tax.
If you’re renewing your tax in person at the Post Office, you’ll need to take a copy of:
- the logbook (V5C) in your name (or reminder letter from the DVLA)
- your insurance certificate
- your MOT certificate
These requirements mean you won’t be able to tax a second-hand car for the first time at the Post Office.
The MOT requirements are removed if the car is less than three years old.
If you’re looking to cancel road tax
You can tell the DVLA to cancel your vehicle tax if:
- your vehicle is off the road
- you’re selling the car
- the car has been scrapped
The DVLA will refund tax for any full months you’ve paid for and not used.
If you’re taxing a brand-new car for the first time
Your car dealer will usually arrange car tax for you.
The ‘on the road’ price usually includes the cost of the first year’s car tax and new registration fee, so you won’t have to pay these separately.
The dealer will supply the DVLA with the information they need, including proof of your name and address.
After receiving the application, the DVLA will search the insurance database to check that cover is in place.
Car tax payment
You can buy car tax in one of three ways:
- annual lump sum
- six-monthly lump sum
- monthly instalments via Direct Debit
The cheapest way to pay is in a lump sum, although you may prefer the convenience of paying monthly – especially if you’re not planning on keeping the car for the full 12 months.
If you cancel your Direct Debit or miss payments, this can lead to the cancellation of your car tax, so it’s vital this doesn’t happen.
Driving without tax
According to the GOV website, vehicle owners face an out of court settlement (OCS) fine set at £30, plus one and a half times the outstanding vehicle tax, if they're caught driving an untaxed vehicle.
Even if you don’t drive an untaxed vehicle but own it, you can still be charged. A late licensing penalty (LLP) letter is issued automatically. LLP is set at £80 and reduced to £40 if paid within 33 days.
This comes from the DVLA so you won't get any points on your licence. They do, however, have the power to clamp your vehicle until you pay, and the fine could increase to up to £1,000 (plus court fees) if the case goes to court.
Police use Automatic Number Plate Recognition technology to check if a car is taxed; if you're caught driving without tax by the police you could be issued with an instant fixed penalty notice of up to £1,000.
