VED car tax changes: all you need to know about road tax
We break down the latest UK VED road tax rules, including those focusing on diesel NOx emissions and premium EVs
Due to ever-tightening emissions regulations and the increasing popularity of all-electric vehicles, rules around Vehicle Excise Duty (VED) or road tax are becoming increasingly complex to understand. To help clarify the new system and ascertain exactly what you should be paying, we delve into the details.
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Road tax changes from April 2020
Following a fresh set of first year road tax bands for new diesel cars in 2018, the government has added yet another layer of complexity to VED in April of this year. Alongside a bump in annual rates in line with inflation and the scrapping of the premium electric car tax, the system was switched to the more accurate WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions figures.
The WLTP cycle replaced the outdated NEDC (New European Driving Cycle) in September 2017, designed to test vehicles in more realistic use scenarios, bringing the official figures closer to real-life figures. Due to the rise in stated emissions, some models may have moved into the band above, thereby raising road tax.
Previously, all vehicles priced above £40,000 were hit with the £325 premium car tax, however this was scrapped entirely for all-electric models at the beginning of April, saving drivers £1625 should they keep the vehicle for six years.
VED tax bands: 1 April 2020 onwards
Emissions (g/km of CO2) | Diesel cars meeting RDE2 and petrol cars first-year rate | All other diesels first-year rate | Alternative-fuel vehicle first-year rate | Standard petrol/diesel annual rate | Standard alternative fuel annual rate |
0 | £0 | £0 | £0 | £0 | £0 |
1-50 | £10 | £25 | £0 | £150 | £140 |
51-75 | £25 | £110 | £15 | ||
76-90 | £110 | £135 | £100 | ||
91-100 | £135 | £155 | £125 | ||
101-110 | £155 | £175 | £145 | ||
111-130 | £175 | £215 | £165 | ||
131-150 | £215 | £540 | £205 | ||
151-170 | £540 | £870 | £530 | ||
171-190 | £870 | £1,305 | £860 | ||
191-225 | £1,305 | £1,850 | £1,295 | ||
226-255 | £1,850 | £2,175 | £1,840 | ||
Over 255 | £2,175 | £2,175 | £2,165 | ||
Cars costing above £40,000 pay £325 annually for five years from the second year of registration. | |||||
Road tax changes from April 2018
In April of 2018, new first year road tax bands were introduced for all diesel vehicles sold from then onwards. Based around the Real Driving Emissions phase 2 (RDE2) regulations, the bands apply only for the ‘First Year [tax] Rate’ and rise by one band if they cannot meet the Euro 6 emissions standards in these 'real world' tests.
The maximum limit is set at 80mg/km, although the government has allowed for a compliance factor of 1.5 times, elevating the true limit to 140mg/km. However, cars that breach this upper figure are pushed into the tax band above, putting up the cost of ownership in the first year.
Manufacturers are beginning to roll out vehicles that meet RDE2 standards, but as the new regulations only came into effect in January 2020, there are plenty that don’t. Regardless, this new tax only applies on the initial first year tax payment, and doesn’t represent as big a change as was made to the VED tax bands in 2017.
The Treasury estimated that nearly two million cars would slip into the higher bracket, but those that do are unlikely to incur a large financial penalty. For instance, Ford Fiesta owners saw their first year VED rates jump by £20. Only drivers of particularly dirty cars, such as big SUVs, might want to consider downsizing in light of the changes, with a Porsche Cayenne now likely to have £300 added to its first year tax bill. It’s also worth considering that these initial VED bills are included in the car’s price, so manufacturers may choose to incorporate it into the initial cost of the vehicle rather than pass it to the owner directly.
The latest round of VED revisions centre around diesel cars and only impact the first year tax rate paid – the annual £140 fee remains. The table below shows how the new rates work. Any car failing to meet the Euro 6 standards in real world testing moves up a band, and thus pays anything from £15 to £500 more in first year rates.
Diesel tax bands from April 2018
CO2 emissions (g/km) | Current first year VED rates | First year VED rates for diesels bought from April 2018 not meeting real world Euro 6 standards |
0 | £0 | £0 |
1 - 50 | £10 | £25 |
51 - 75 | £25 | £105 |
76 - 90 | £105 | £125 |
91 - 100 | £125 | £145 |
101 - 110 | £145 | £165 |
111 - 130 | £165 | £205 |
131 - 150 | £205 | £515 |
151 - 170 | £515 | £830 |
171 - 190 | £830 | £1,240 |
191 - 225 | £1,240 | £1,760 |
226 - 255 | £1,760 | £2,070 |
Over 255 | £2,070 | £2,070 |
VED car tax rules as of April 2017
April of 2017 marked a substantial shake-up in the VED rules, with regulations allowing for far fewer tax-free vehicles. All except pure electric vehicles were given a new flat rate of £145 a year. Even the cleanest plug-in hybrids aren't exempt though, but do get a lower £135 annual charge.
The first year's cost is emissions based – with relatively clean vehicles like the Suzuki Swift Sport attracting a £170 charge while cars like the Ford Mustang right up there at £2135. This is likely to be factored in to list price, while the following years are set at the fixed rate of £145.
VED tax bands: 1 April 2017 onwards
Emissions (g/km of CO2) | Diesel cars meeting RDE2 and petrol cars first-year rate | All other diesels first-year rate | Alternative-fuel vehicle first-year rate | Standard petrol/diesel annual rate | Standard alternative fuel annual rate |
0 | £0 | £0 | £0 | £0 | £0 |
1-50 | £10 | £25 | £0 | £150 | £140 |
51-75 | £25 | £110 | £15 | ||
76-90 | £110 | £135 | £100 | ||
91-100 | £130 | £155 | £125 | ||
101-110 | £150 | £175 | £145 | ||
111-130 | £170 | £215 | £165 | ||
131-150 | £210 | £540 | £205 | ||
151-170 | £530 | £870 | £530 | ||
171-190 | £855 | £1,305 | £860 | ||
191-225 | £1,280 | £1,850 | £1,295 | ||
226-255 | £1,815 | £2,175 | £1,840 | ||
Over 255 | £2,135 | £2,175 | £2,165 | ||
Cars above £40,000 pay £325 annual supplement for five years from the second year of registration. | |||||
How to pay car tax
VED can now be paid on the government website. Should you have received a DVLA V11 reminder letter through the post, this can be referenced in the process to speed things along.
Car tax can also be paid at your local Post Office, all you’ll need is your V5C, a valid MoT, proof of insurance and a road tax reminder should you have one. The DVLA also offers a 24 hour phone service that can be accessed 0300 123 4321.
Classic car road tax
Alongside their old school charm, classic cars also provide the benefit of zero road tax. What’s less widely known is the requirement to apply for a road tax exemption, something that can be granted should your car be 40 years old or more. The process can once again be undertaken on the government website, or at a Post Office.
