Whether you’ve got an old vehicle you’ve had for years or planning on applying for car finance, it’s important to be aware of the costs of driving in the UK. One particularly important cost to consider is car tax. But what is it?
In this car tax guide, we’ve explained what car tax actually is, how much you can expect to pay, how to pay, and when it’s usually due.
What is car tax?
Car tax (also known as road tax or vehicle tax) is the Vehicle Excise Duty owed by almost all drivers each year. It’s paid directly to the government (DVLA) and allows you to freely drive and park on public roads. The idea is that funds raised are used to benefit all road users, such as contributing to necessary work and maintenance.
How much is car tax?
The cost of car tax has changed a few times over the years, so we’ve made it simple for you to check how much you’re liable for.
Cars first registered before March 2001
If you drive a used car that was first registered before 1st March 2001, you’ll be charged a standard car tax rate depending on the size of your vehicle’s engine:
· Cars with an engine size under 1549cc are charged £180 annually (you can also pay in monthly instalments totalling £189).
· Cars with an engine size over 1549cc are charged £295 annually (you can also pay in monthly instalments totalling £309.75).
If your car is over 40 years old, however, you’ll be exempt from paying car tax.
Cars first registered between 1st March 2001 – 31stMarch 2017
If your car was first registered between 1st March 2001 and 31st March 2017, you’ll be charged car tax depending on the amount of CO2 your vehicle emits.
Your car will fall into one of 13 tax bands A-M, with cars in tax band A (up to 100g/km) being exempt and cars in tax band M (over 255g/km) liable for the maximum tax payment of £630 annually.
Cars first registered from 1st April 2017
If your car was registered after 1stApril 2017, you’ll be charged car tax depending on the amount of CO2 your vehicle emits for the first year, followed by a standard payment of £165 annually (rate for alternative fuel cars is £155 per year).
Your car will fall into one of 13 categories, with road tax payments for the first year ranging from £0 (0g/km) to £2,245 (over 255g/km).
Importantly, cars listed from new at £40,000+ will also be taxed an additional £355 for the first five years (with zero-emission EVs exempt). This is the case even if the ownership changes during the first five years and if the price you pay is below £40,000, you’ll still be required to pay the additional £355.
Which cars are exempt from road tax?
Fortunately, if you drive a zero-emission electric vehicle (EV), you’re not liable to pay electric car tax, no matter how old your car is or whether it’s listed for over £40,000.
Other exempt vehicles include those used in agriculture, including tractors, and those for disabled drivers or passengers. Importantly, even if you’re exempt, you still need to go through the process and apply for road tax.
How to pay car tax
When it comes to paying car tax, you have two options:
1. Pay online
2. Pay at the post office
Paying online is the simplest solution, and allows you to complete the step-by-step process instantly and drive your new car straight away.
To pay online, you’ll need a reference number from a recent DVLA reminder or your vehicle’s log book. If you don’t have either of these resources, you should apply for a duplicate vehicle log book from the DVLA.
How to claim back car tax
If you’ve made your annual car tax payment but no longer have the vehicle (or it’s off the road), you can get a refund for any remaining months.
All you need to do is get in touch with DVLA, and let them know whether your car has been sold, taken off the road, written off or scrapped, stolen, exported out of the UK, or registered as exempt. If applicable, your direct debit will then be cancelled, and you’ll receive a cheque in the post covering any full months left on your payment.
When is car tax due?
You can choose to make car tax payments as one single sum each year or across affordable monthly instalments. Whichever method of payment you choose, the tax will be valid for 12 months.
How to check car tax
If you’re unsure when you last made a car tax payment, and more importantly when your next one might be due, you can check the DVLA’s vehicle enquiry database with just your number plate.
How long does it take for car tax to show online?
After you’ve made a car tax payment, you might be tempted to check its status online to confirm the transaction has gone through with no hiccups. However, be aware that it can sometimes take up to five days for a car tax payment to register against your vehicle. That said, you can drive your car immediately after you’ve taxed it!
What happens if I pay my car tax late?
If your car tax payment to the DVLA fails, you’ll receive an email to notify you of the incomplete transaction. The government will then attempt to take the payment again within four working days.
If the payment fails for a second time, you’ll receive a follow-up email informing you that your direct debit has been cancelled and your vehicle is no longer taxed.
At this point, it’s illegal to continue using your car until you’ve either taxed it or told the DVLA that it’s officially ‘off-road’. You’ll also be charged £80, with penalties escalating the longer you delay - your car can even end up being clamped or crushed.
If you’re thinking of buying a used car, it can be helpful to consider hire purchase finance or PCP finance, which allows you to spread affordable repayments over a pre-agreed term. Get in touch with our team today for even more useful help and advice.