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How to tax your car (the complete guide)

  Tuesday, 12 March 2024

There have been some significant changes to the Vehicle Excise Duty (VED) regulations in recent years, with more to come in the near future. Here’s our guide to the vehicle tax rules, and answers to some common questions you may have about how to tax your car.

Note in car window says 'TAX IN POST'

How is car tax (VED) calculated?

Ultimately, the car tax you pay will differ depending on how environmentally friendly the car is. That’s because the amount of tax you pay on your vehicle is based on the amount of carbon dioxide (CO2) it emits into the atmosphere.

For cars first registered between 1 March 2001 and 31 March 2017, the rates are variable, divided into bands from ‘A’ to ‘M’. Each band signifies the number of emissions allowed by the vehicle. ‘A’ is the band for vehicles with the least CO2 emissions, all of which are currently completely exempt from car tax. However, this is set to change soon. Most standard petrol or diesel cars fall within band E, which are charged at £180 annually.

Car tax for older vehicles

Cars which were registered before 1st March 2001 are taxed based on the size of their engine. Generally, those with engines smaller than 1549cc pay £200 per year while larger models and light goods vehicles with engine sizes over 1549cc require a yearly payment of £325.

But now a rolling 40-year car tax exemption for classic vehicles is in place. If your vehicle was built 40 or more years ago, it should fall under this exemption. April is the key month. So, for example, a car first registered in 1984 would be exempt from VED in April 2024.

What are the current vehicle tax rules?

Here is a summary of the car tax exemptions and most important things to remember.

  • Diesel cars from 1 April 2018 are charged a higher first year rate unless they meet RDE2 emission standards*
  • For all cars registered after 1 April 2020, the first-year rate is likely to be higher than previous years, as official CO2 measurements rose due to changes in the testing procedure
  • The standard rate of car tax kicks in after the first year. From April 2023, drivers paid £180 for petrol and diesel cars and £170 for hybrids and alternative fuel cars
  • Zero-emission cars (such as 100% battery electric vehicles) are currently exempt from car tax
  • The £40,000 rule for vehicles that are not zero emission. Vehicles with a list price of over £40,000 incur a supplementary £390 per year for five years after registration on top of the standard rate

*RDE stands for Real Driving Emissions. This is the test that can be used by vehicle manufacturers to test the emissions a car produces under real driving conditions. RDE was introduced in 2017 and was made mandatory for all new cars from 2019.

How do I check my vehicle is taxed?

It’s easy to check whether the car you’re driving has had its vehicle excise duty paid. If you’re unsure about a rental car, or simply want to check your own tax status, you can enter the make of car and registration details at gov.uk.

How do I pay my car tax?

Motorists are expected to pay vehicle tax in advance through the DVLA. You can pay by debit or credit card, or via direct debit. You can pay by direct debit annually, six-monthly or monthly, but the annual charge will be less.

Vehicle tax changes in 2025

Car tax rules are changing on 1 April 2025.

Zero emission vehicles will no longer be exempt from car tax. Electric vehicles will pay a first-year rate, and a standard annual rate, which are currently £10 and £180 respectively. This is because EVs are starting to become more common on our roads, and the government cannot afford to have so many cars at a discounted tax rate. Zero emission vehicles with list prices of over £40,000 will also have to pay the supplementary £390 rate in addition to the standard VED rate.

Does car tax transfer to the new owner?

Leftover tax on used cars used to transfer to the new owner on purchase. However, this is no longer the case. When buying a car, the new owner takes responsibility for its taxation immediately. You can tax your vehicle online or at a Post Office. Sellers now receive a full refund for any of the months remaining on their car tax.

Beware of timing, sellers; you will only be refunded car tax for full calendar months. Making a transaction one week into a given month will entail taxing the vehicle for the whole of that month, regardless.

Can you drive a car without tax?

The car tax status of any vehicle can now be checked online using the make and registration details. Where enforcement agents could previously perform a simple inspection of paper vehicle tax discs, checks are now performed digitally. The police, the DVLA and other agencies utilise automatic number plate recognition cameras (or ANPR cameras) linked with a nationwide electronic vehicle register.

ASM can help you find the best used car

If you’re wondering how to tax a used car, does that mean you already in the market for your next car? ASM Auto Recycling has an extensive range of repairable vehicles, with regular online salvage auctions. Read our guide to buying used cars at online auctions. As an Authorised Approved Treatment Facility, we can also take unwanted used cars to be scrapped, recycled, and resold where possible. Get a quote from us today.

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