What is VED (Vehicle Excise Duty)?

VED - or car tax - is affected by a car’s age and its CO2 emissions. Find out what VED is and how much it costs with our guide to road tax

Trinity Francis
May 27, 2022

Vehicle excise duty (VED) - also known as ‘road tax’ or ‘car tax’ - is an important cost that comes with having a car. Unlike the name suggests, this tax does not go towards the upkeep of the roads, which is covered by council tax. Instead, road tax contributes towards funds for travel infrastructure.

While it’s a necessary part of having a car, VED can cost from £0 up to £630 per year (with first-year rates of up to £2,365), so it’s good to look at what the tax rate will be before you buy a car.

VED is charged at different rates based on how old and how polluting your vehicle is. There are some cars with very low or zero emissions, including hydrogen and electric cars that are not charged road tax at all.

There are three different systems in place, to calculate how much you pay in road tax depending on how old your car is. The two most recent systems - in place since 2001 and 2017 - use a car’s official CO2 emissions figure to determine the tax due. Emissions figures are measured in grammes per kilometre (g/km) of carbon dioxide.

Emissions details for your car can be found on the vehicle’s registration certificate, the V5C, or you can look it up online on the DVLA vehicle enquiry website using the number plate. If you have the 11-digit reference number from the V5C, the system will be able to give an accurate figure for that specific vehicle.

This guide to VED explains what the differences are and key things to look out for when choosing a car or paying road tax.

Road tax for cars registered from 2017-present

Year 1
CO2 emissionsDiesel cars that meet the RDE2 standard and petrol carsAll other diesel carsAlternative fuel cars
0g/km£0£0£0
1 to 50g/km£10*£25*£0
51 to 75g/km£25*£120*£15*
76 to 90g/km£120*£150*£110*
91 to 100g/km£150*£170*£140*
101 to 110g/km£170*£190*£160*
111 to 130g/km£190*£230*£180*
131 to 150g/km£230*£585*£220*
151 to 170g/km£585*£945*£575*
171 to 190g/km£945*£1,420*£935*
191 to 225g/km£1,420*£2,015*£1,410*
226 to 255g/km£2,015*£2,365*£2,005*
Over 255g/km£2,365*£2,365*£2,355*

 

Year 2 onwards
Petrol or diesel£165*
Electric£0
Alternative£155*

 

*Plus £355 a year for the first five years for cars with a list price of more than £40,000 (excludes zero-emission cars)

Under the current system, the first year of road tax for a new car is calculated based on the car’s CO2 emissions. Subsequent years are then taxed at a standard rate; £165 for petrol and diesel cars and £155 for alternative fuel models, which include hybrids and cars that can be fuelled by bioethanol or liquid petroleum gas (LPG).

Electric and hydrogen-powered cars have zero tailpipe emissions, so there’s no road tax to pay on these vehicles. However, even if you have no road tax to pay, you must still register your car for tax.

If you were to buy a new Nissan Qashqai with a 1.3-litre petrol engine, for instance, the official emission figure is 146g/km. As a result, this Qashqai falls within the 131 to 150g/km tax bracket. The rate for this is £230 for the first year, then from the second year, road tax would be the standard rate of £165.

Search 2017-on used cars by emissions:

These costs would differ, however, if the car was worth more than £40,000 when new. If the advertised price was over £40,000, including optional extras, then the first five years of road tax payments are charged at a higher rate. This applies even if the first owner negotiated the price to below £40,000.

After the first year of road tax, which is based on CO2 emissions, petrol and diesel cars worth over £40,000 cost £520 per year to tax and alternative fuel cars cost £510 for the following five years, after which road tax will be charged at the standard rate. Electric and hydrogen-powered cars in this price range remain exempt from road tax.

If you bought an Audi A5 with a 2.0-litre petrol engine that cost more than £40,000 then the first year of tax would be £230, based on the car’s CO2 emissions. Then from years two to six, road tax would be charged at £520. From year seven the standard rate of £165 would be due.

These rates are important to keep in mind when looking for a used car registered from 2017 that would have been worth £40,000 or more when new, as the higher rate for the first five years may still apply.

Road tax costs for cars registered between 1 March 2001 and 31 March 2017

Band and CO2 emission12 months' VED
A: Up to 100g/km£0
B: 101 to 110g/km£10
C: 111 to 120g/km£20
D: 121 to 130g/km£125
E: 131 to 140g/km£155
F: 141 to 150g/km£170
G: 151 to 165g/km£210
H: 166 to 175g/km£255
I: 176 to 185g/km£280
J: 186 to 200g/km£320
K: 201 to 225g/km*£350
L: 225 to 255g/km£605
M: Over 255g/km£620

 

*Cars registered before 23 March 2006 with a CO2 figure over 225g/km are capped at band K, or £350

Cars registered between 2001 and 2017 are subject to a different tax structure. Instead of a standard rate based on fuel type, there are different tax bands based on how polluting the car is.

Search pre-2017 used cars by emissions:

For petrol and diesel cars registered in this time period, road tax can vary from £0 for cars with emissions of up to 100g/km of carbon dioxide to £630 for cars that emit over 255g/km. There is an exception, though; cars registered before March 2006 with emissions of over 225g/km are capped at a lower rate, which is currently £350.

A 2016 Ford Fiesta with a 1.25-litre petrol engine, for instance, has an official emission figure of 122g/km. This falls into band D - which currently costs £135 per year - and covers vehicles that emit between 121g/km and 130g/km.

Road tax for cars registered before 1 March 2001

Engine size12 months' VED
Up to 1549cc£180
Over 1549cc£295

 

This cost structure for cars registered before 2001 is the most straightforward. The tax system is simply split into two halves based on engine size. Cars with engines under 1,549cc are taxed at £180 per year and those with engines over 1,549cc are £295.

The DVLA vehicle enquiry website can also tell you a car’s engine size, and show which tax rate would apply to that vehicle. For example, a 2000 Volkswagen Golf with a 2.0-litre petrol engine slots into the higher category, meaning tax for this car would come in at £295 per year.

If your car is over 40 years old, meanwhile, the vehicle is exempt from tax. However, you still have to apply for a road tax exemption. This is also known as the ‘historic tax class’.

How to pay road tax

Road tax can be paid for in a number of ways; either in one annual payment, every six months or monthly by direct debit. Paying in instalments or biannually works out more expensive due to interest charges. All references to tax costs in this article are based on single annual payment costs.

Making one annual payment is the cheapest way to pay road tax, with paying a single annual payment by direct debit being the same price. Pay monthly by direct debit and you’ll be charged 5% interest. A single payment for six months of road tax is 10% more than what half a year costs in one payment, while paying for six months via direct debit also comes with 5% interest on top.

For example, to pay road tax for a petrol or diesel car registered after 2017 via a monthly direct debit, you would pay £8.25 more in total across the year. A single payment for six months of tax also costs £8.25 more but only £4.13 more if you pay for six months via direct debit.

As road tax is non-transferrable when you sell a vehicle, any full months of tax that you have already paid for will be refunded to you when you sell the car. Likewise, you will have to tax any vehicle that you buy. Remember, even if the cost to tax your car is £0 you must register your vehicle for tax.

 

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