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How car tax works

Tamires Criscio
Tamires Criscio
  | Edited by Tom Church
Updated 26th April 2021

Are you planning to buy a car or have bought one recently? Latest Deals will explain what car tax is and how to pay for yours!

What is car tax? 

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Car tax is the most used name for Vehicle Excise Duty (VED). This is a tax for driving a vehicle on public roads. A car tax can cost up to £1,000 per year or more depending on how environmentally friendly your car is and when your car was first registered.

How does car tax work? 

Car tax rates will change depending on engine size, fuel type, carbon dioxide (CO2) emissions and when the car was first registered. 

An important matter to keep in mind is that you can only pay for car tax if your car is covered by insurance and has a valid MOT certificate if your car is aged three years or older.

This means two things, if you want to have a car in the UK, you will need to pay for car insurance and if your car is older than three years, you will need an MOT certificate as well. 

What is an MOT Certificate and how to get one? 

An MOT Certificate proves that your car is safe to drive on public roads and is within the expected environmental standards. Learn more about getting an MOT Certificate here. 

How is car tax monitored?

In the UK, you will find Automatic Number Plate Recognition (ANPR) cameras spread out around the roads. They are there to capture car plates and identify which car is within or out of the regulations. This system is connected to the DVLA database where all records of taxed and untaxed vehicles are stored. If your car plate is captured by one of these cameras, and you haven’t paid your car tax, you will have problems, such as expensive fines or even lose your car. We will talk more about this further down in this guide.

What does the DVLA database mean? 

This is the database system of the Driver and Vehicle Licensing Agency (DVLA). DVLA is responsible for making sure that all drivers and cars are within the UK car regulations. Accessing the DVLA database, you can find many types of information such as: 

  • Car tax - how much you need to pay and when do you need to pay.
  • SORN status - this is a status that shows if your car has been registered as off the road.
  • When your car’s MOT expires.
  • The date your car was first registered.
  • Last log book (V5C) issue date - this document proves your ownership of the car. 

Learn more about DVLA here. 

IMPORTANT NOTE: Even if you don’t need to pay for car tax, you need to let DVLA know about your car tax situation to make sure you don’t pay any fine. Any changes of circumstances regarding your car also need to be informed to DVLA. 

How can I pay for my car tax?

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The best way to pay for your car tax is online. You will need to provide a reference number from one of these documents: 

  • A recent reminder (V11) (which is a warning letter from the DVLA if you are due to pay your car tax).
  • Vehicle log book (V5C) in your name.

You can pay for it via debit or credit card and direct debit. You can pay for it monthly, every 6 months or annually. If you choose to pay monthly or every 6 months, you will be charged 5% more. So it’s better to pay annually. 

Can I pay my car tax at my Post Office?

Yes, you can pay for your car tax at the Post Office. Find your nearest Post Office here. 

Who doesn’t need to pay for car tax? - Car Tax Exemptions

There are many car tax exemptions. You can check them out here and below:

New cars that produce 0 grams of CO2 emissions and have a price of less than £40,000
Cars registered between 1 March 2001 and before 1 April 2017 that produce up to 100 grams of CO2 per kilometre driven
Cars owned by someone that receives War Pensioners’ Mobility Supplement
Cars owned by a disabled person
Disabled passenger cars
Mobility scooters, powered wheelchairs and invalid carriages
Cars used just for agriculture, horticulture and forestry
Historic cars built more than 40 years before 1 January of the current year

IMPORTANT NOTE: If your case fits in one of these categories and you don’t need to pay for car tax, you still need to apply for car tax, this is the only way to tell DVLA that you don’t need to pay. If you don’t tell DVLA about your car situation, you can be fined.

How to avoid paying car tax: SORN

If you are required to but don’t want to pay car tax, you will need to register a car as off the road. You won’t be able to drive your car on public roads but won’t pay any car taxes as well. This is called Statutory Off Road Notification (SORN).

How much is car tax in the UK?

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As mentioned above, car tax rates will change depending on engine size, fuel type, carbon dioxide (CO2) emissions and when the car was first registered. You will need first to identify the registration date, then, your engine size, fuel type and carbon dioxide emissions. 

IMPORTANT NOTE: It’s important to keep in mind that car tax rules change often due to the new legislation around CO2 emissions.

For cars registered after April 2020, the rates are going to be a bit higher due to the changes in the official test, it’s not that they are more expensive, but the tests are more precise so your car will probably be emitting more CO2 as result compared to previous years. 

For cars registered after April 2021, a new table was recently released.

Checking your car's first registration date

You can find your car’s first registration date in your car's V5C document (proof of your ownership of the car). Your car tax rate will be based on your car's first registration date. 

If your car was registered before 1st of March 2001, you will pay one rate, if your car was registered after 1st of March 2001 but before 1 April 2017, you will pay another rate, and the same happens, if your car was registered on or after 1 April 2017. 

Using Car Tax Rates Calculator

If you are not sure how much car tax you need to pay, you can use this vehicle tax rates calculator provided by the government. 

NEW Car Taxes for cars registered on and after 1st April 2021 

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Cars registered on or after 1 April 2017
CO2 emissionsDiesel cars (TC49) that meet the RDE2 standard and petrol cars (TC48)All other diesel cars (TC49)Alternative fuel cars (TC59)
0g/km£0£0£0
1 to 50g/km£10£25£0
51 to 75g/km£25£115£15
76 to 90g/km£115£140£105
91 to 100g/km£140£160£130
101 to 110g/km£160£180£150
111 to 130g/km£180£220£170
131 to 150g/km£220£555£210
151 to 170g/km£555£895£545
171 to 190g/km£895£1,345£885
191 to 225g/km£1,345£1,910£1,335
226 to 255g/km£1,910£2,245£1,900
Over 255g/km£2,245£2,245£2,235

IMPORTANT NOTE: You can use this link to check it out at Gov.uk. 

Cars registered after 1st of March 2001 but before 1 April 2017
Petrol car (TC48) and diesel car (TC49)
Band and CO2 emissionSingle 12 month paymentSingle 12 month payment by Direct DebitTotal of 12 monthly instalments by Direct DebitSingle 6 month paymentSingle 6 month payment by Direct Debit
A: Up to 100g/km£0£0N/AN/AN/A
B: 101 to 110g/km£20£20£21N/AN/A
C: 111 to 120g/km£30£30£31.50N/AN/A
D: 121 to 130g/km£130£130£136.50£71.50£68.25
E: 131 to 140g/km£155£155£162.75£85.25£81.38
F: 141 to 150g/km£170£170£178.50£93.50£89.25
G: 151 to 165g/km£210£210£220.50£115.50£110.25
H: 166 to 175g/km£250£250£262.50£137.50£131.25
I: 176 to 185g/km£275£275£288.75£151.25£144.38
J: 186 to 200g/km£315£315£330.75£173.25£165.38
K*: 201 to 225g/km£340£340£357£187£178.50
L: 226 to 255g/km£585£585£614.25£321.75£307.13
M: Over 255g/km£600£600£630£330£315
Cars registered after 1st of March 2001 but before 1 April 2017
Alternative fuel car (TC59)
Band and CO2 emissionSingle 12 month paymentSingle 12 month payment by Direct DebitTotal of 12 monthly instalments by Direct DebitSingle 6 month paymentSingle 6 month payment by Direct Debit
A: Up to 100g/km£0N/AN/AN/AN/A
B: 101 to 110g/km£10£10£10.50N/AN/A
C: 111 to 120g/km£20£20£21N/AN/A
D: 121 to 130g/km£120£120£126£66£63
E: 131 to 140g/km£145£145£152.25£79.75£76.13
F: 141 to 150g/km£160£160£168£88£84
G: 151 to 165g/km£200£200£210£110£105
H: 166 to 175g/km£240£240£252£132£126
I: 176 to 185g/km£265£265£278.25£145.75£139.13
J: 186 to 200g/km£305£305£320.25£167.75£160.13
K*: 201 to 225g/km£330£330£346.50£181.50£173.25
L: 226 to 255g/km£575£575£603.75£316.25£301.88
M: Over 255g/km£590£590£619.50£324.50£309.75

IMPORTANT NOTE: You can use this link to check it out at Gov.uk.

Cars registered before 1st of March 2001
Engine size (cc)Single 12 month paymentSingle 12 month payment by Direct DebitTotal of 12 monthly instalments by Direct DebitSingle 6 month payment
Not over 1549£170£170£178.50£93.50
Over 1549£280£280£294£154

IMPORTANT NOTE: You can use this link to check it out at Gov.uk.

Not paying for your car tax: what happens then

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If you don’t pay for your car tax, you will receive a Late Licensing Penalty (LLP) letter with an £80 fine. This can be reduced to half if you pay within the next 28 days from the issued date. If you fail to pay, the case will be referred to a debt collection agency. 

If you still don’t pay, you will be issued with an Out of Court Settlement (OCS) letter. This will cost you £30 plus one-and-a-half times the outstanding car tax. If you still don’t pay, this case can go to court with a penalty of £1,000 or five times the amount chargeable (whichever is greater). If you still don’t pay, the penalty goes up to £2,500, if you are caught using your untaxed car. 

After your case can go to court, you can get your car clamped until you pay what you owe, your car is then storage between 7 to 14 days, if you don’t take any actions, you lose your car, which can be disposed of at auction, broken for spares, or crushed.

Selling your car: what happens then

Car tax is non-transferable which means that when you sell your car, the tax doesn’t go with it. When you sell your car, you need to let the DVLA know immediately so they can transfer the ownership of the car and cancel the existing tax. It’s then the responsibility of the new owner to pay for car tax. The DVLA will refund any overpaid car tax when you let them know the car has been sold.

IMPORTANT NOTE: If you are buying a car, no matter if it’s old or new, you always have to apply for a new car tax, even if it’s already paid for that year. You need to do the same if the car has a SORN status, by getting a new one. 

Taxing a brand new car for the first time: what happens then

Usually, when you buy a brand new car for the first time, your car dealer will arrange all the paperwork, including your car tax, to make sure you can leave the store driving your car. In addition, all the paperwork is frequently included in the price you are paying for the car. 

FAQ 

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