How Much Is My Car Tax

How Much Is My Car Tax

How Much is My Car Tax?

As an obligatory expense for UK motorists, it’s important to understand how your Vehicle Excise Duty (VED), also known as car tax, is calculated. The amount you’ll pay depends on factors like your vehicle’s age, fuel type and CO2 emissions.

This in-depth guide explains what car tax is, how it’s calculated, recent changes to the system, and provides tips to legally minimize your tax burden. Read on for plain English insights into demystifying this annual bill.

What is Car Tax Exactly?

Car tax, known officially as Vehicle Excise Duty (VED), is an annual tax levied by the DVLA for using a vehicle on UK roads. It applies to most motorized vehicles like cars, vans, motorbikes and motorhomes, raising over £6 billion for the Treasury annually to fund road infrastructure and maintenance.

You must tax your vehicle and display a valid electronic receipt before using it on public roads. Driving an untaxed vehicle illegally risks court fines of up to £1,000.

What Is Car Tax Exactly?
What is Car Tax Exactly?

How is Your Car Tax Calculated?

There are three key factors determining your VED tax band and rates:

  1. Vehicle Type – The default tax class your vehicle falls under based on aspects like fuel, engine size, weight, emissions and age. Different bands have set rates.
  2. CO2 Emissions – For newer cars, CO2 emissions help determine the taxable band. Cleaner cars tend to pay less.
  3. Fuel Type – Zero-emission electric cars and alternative fuels have the lowest tax rates. Petrol and diesel vehicles pay more.

Your vehicle logbook (V5C) specifies the relevant details deciding your road tax class and charges.

How Did the 2017 VED Changes Affect Costs?

In April 2017, the government overhauled the car tax system:

  • CO2 emissions-based – Tax bands are now determined by CO2 emissions rather than engine size to incentivize cleaner vehicles.
  • First year rates – New car buyers now pay higher ‘first year rates’ up to £2,175, compared to just £55 previously.
  • Standard rates unchanged – Standard car tax rates after the ‘first year’ were largely unchanged for existing cars.

The reforms were seen by many as a ‘stealth tax’ on new diesel car buyers facing steep first-year costs, while older vehicles saw minimal changes.

How Did The 2017 Ved Changes Affect Costs?
How Did the 2017 VED Changes Affect Costs?

What are the Current 2023 Car Tax Rates?

While each vehicle has a specific tax rate, here are some common 2023 VED bands and costs:

Petrol/Diesel Cars:

  • First year rates – From £10 to £2,175 depending on emissions
  • Standard rate – £165 for cars under 256g/km CO2

Electric Cars:

  • First year rate – £0 for all zero emissions electric cars
  • Standard rate – £0 annual cost for full electric cars

Motorbikes:

  • First year rate – From £16 to £120 depending on engine size
  • Standard rate – From £22 to £102 annually

Vans:

  • First year rate – £290 for new diesel vans
  • Standard rate – £170 per year for diesel vans under 3.5 tonnes

As shown, electric and lower emission vehicles have much lower rates compared to petrol, diesel and high emission models. Check your V5C logbook for your exact tax class and costs.

6 Ways to Legally Reduce Your Car Tax Costs\

While difficult to avoid entirely, there are legal ways to cut your tax burden:

  1. Go Electric – Benefit from the £0 VED rates for electric or hybrid vehicles.
  2. Buy Used – Used cars keep lower pre-2017 tax bands. Avoid first year costs.
  3. Adjust CO2 – Legal modifications like chip tuning can optimise emissions.
  4. Delay Payment – New cars get a tax-free grace period before VED applies.
  5. Claim Exemptions – Some groups like disabled drivers qualify for car tax exemption.
  6. SORN your Vehicle – A Statutory Off Road Notification removes the tax obligation when not in use.

Careful vehicle selection and using exemptions can lead to substantial VED savings.

6 Ways To Legally Reduce Your Car Tax Costs\
6 Ways to Legally Reduce Your Car Tax Costs\

Do I Need to Display a Car Tax Disc?

Historically, once tax was paid an annual paper disc had to be displayed on the windscreen as VED proof. However, since October 2014 tax discs were abolished in favour of an electronic system.

Now when you tax a vehicle, the DVLA automatically issues an electronic VED certificate accessible online. Number plate recognition cameras enforce tax status, with no need for a paper disc.

How to Tax Your Vehicle Online

These days taxing your vehicle is a quick online process:

  • Visit www.gov.uk/vehicle-tax
  • Enter your registration number
  • Confirm details like colour and engine size
  • Choose annual or monthly payment
  • Enter payment card details
  • Receive digital confirmation and reminders

Taxing online with the DVLA is the quickest method. You can also tax by phone or at a Post Office.

It is illegal to drive an untaxed vehicle on public roads, unless officially declared SORN, risking fines up to £1,000.

Does the Tax Provide Value for Money?

With Britain’s potholed roads and high tax costs, some argue VED offers poor value. However, abolishing car tax would leave a major funding hole for infrastructure.

Reforms linking VED to emissions provide greater incentives for cleaner, fuel-efficient vehicles. For now, car tax looks set to remain a mandatory annual driving expense.

Understanding your vehicle’s specific tax class, costs and methods to reduce your personal tax burden helps minimize the pain of this annual bill.

FAQs

Q: How is car tax calculated?

A: Based on factors like emissions, fuel type, weight and age which determine the tax band.

Q: Do I need to display a tax disc?

A: No, tax discs were abolished in 2014. Your tax status is now recorded electronically.

Q: How do I tax my car?

A: Easiest is online via the DVLA website. You can also tax by phone or at the Post Office.

Q: When does my car tax expire?

A: Vehicle tax runs annually from the date you first taxed the car, expiring after 12 months.

Q: What happens if I don’t tax my car?

A: Driving an untaxed vehicle illegally risks fines of up to £1,000 if caught.

Q: How can I reduce my car tax?

A: Buying electric/hybrid, using exemptions, declaring SORN, buying used, adjusting CO2.

Conclusion:

Understanding precisely how much car tax you’ll pay based on your vehicle’s specifications is key to budgeting for this mandatory expense. Recent rises in first year rates caught some motorists out, while standard running costs remained stable.

Checking if you qualify for exemptions, buying second hand, going electric and optimising your CO2 emissions can all help minimise your annual tax burden. While car tax looks set to stay, being informed on rates and savvy with savings can take the sting out of your annual VED bill.

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