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Car tax explained

Vehicle Excise Duty is commonly known as road tax or car tax. Find out how much you need to pay and whether you might be exempt.

Amy Smith
Amy Smith
Updated 1 April 2021  | 3 min read

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Key points

  • Vehicle Excise Duty, or car tax, is a tax paid to the government by car owners
  • Electric cars are exempt from road tax. Other vehicles pay different rates depending on their age and/or emissions
  • Currently there’s one rate paid on new cars for the first year, followed by a different rate from the second year onwards

What’s car tax?

Car tax, or road tax, is officially known as Vehicle Excise Duty (VED). It’s money that you as a motorist pay to the government to be used to maintain and repair the UK’s roads.

It’s not optional – you legally must pay it at the set rate for your car.

But it can be a significant annual running cost for your car alongside insurance and fuel and might even influence which vehicle you buy next.

But the good news is that some cars are cheaper than others for road tax – and some cars are zero rated for VED and don’t pay anything at all.

Do I need car tax?

Most vehicle owners need to pay vehicle excise duty. It’s illegal to take your car, motorbike, van or other vehicle onto public roads if it isn’t taxed and insured.

But you don’t need to pay road tax if you keep your vehicle on private land, for example your driveway or garage, as long as you declare a Statutory Off Road Notification (SORN). You can’t drive your car while it has a SORN.

There are a few other exemptions that mean you won’t need to pay car tax.

Car tax exemptions

You might not have to pay vehicle excise duty because either you or your vehicle is exempt.

You’ll be exempt from paying car tax if:

  • You have a disability and are eligible. Find out more about who qualifies here.

Your vehicle will be exempt if:

  • It’s a historic vehicle that was built over 40 years ago
  • It’s an electric vehicle with zero emissions
  • It was first registered between 1 March 2001 and 31 March 2017 and has CO2 emissions of less than 100g/km

You’ll still need to tax your vehicle each year even if you or it are exempt. You just go online when you get your annual reminder and apply for the tax, but no payment will be taken.

Check your car's taxed

You can check online whether your car’s taxed. You’ll see its MOT status too.

How much does car tax cost?

All electric cars are now exempt from paying road tax.

For all other vehicles, the way VED’s calculated has changed over the years, so how much you pay annually will depend on when your car was registered, its emissions, or its engine size.

  • Petrol, diesel and hybrid cars registered on or after 1 April 2017 pay a rate based on emission in the first year, followed by a standard rate from the second year onwards.
  • Petrol, diesel and hybrid cars registered between 1 March 2001 and 31 March 2017 pay an annual rate based on their emissions.
  • You can find out previous first-year rates and the bands for cars produced before 2001 here.

Cars registered after 1 April 2017 – first year rate

If you have a new car that’s in its first year of registration, you pay a first-year rate which is different to what you pay in subsequent years.

First year car tax is based on CO2 emissions and fuel type.

The latest first-year rates for cars registered on/after 1 April 2021 are:

CO2 emissions g/km Petrol cars and diesel cars meeting RDE2 standard Other diesel cars Alternative fuel vehicles (hybrid and LPG cars)
0 £0 £0 £0
1-50 £10 £25 £0
51-75 £25 £115 £15
76-90 £115 £140 £105
91-100 £140 £160 £130
101-110 £160 £180 £150
111-130 £180 £220 £170
131-150 £220 £555 £210
151-170 £555 £895 £545
171-190 £895 £1,345 £885
191-225 £1,345 £1,910 £1,335
226-255 £1,910 £2,245 £1,900
over 255 £2,245 £2,245 £2,235

Cars registered on or after 1 April 2017 – standard rate

If your car’s more than a year old, you’ll pay the standard rate. For cars registered after 1 April 2017, it’s based on your car’s fuel type.

If your car had a list price of £40,000 or more at first registration, you’ll pay the additional rate.

The second-year onwards rates from 1 April 2021 are:

 Fuel type    Annual rate
Petrol/diesel £155
Alternative fuel (hybrid and LPG cars) £145
Electric £0

Cars registered 1 March 2001-31 March 2017

Cars registered 1 March 2001-31 March 2017

CO2 emissions (g/km) Petrol/diesel cars Alternative fuel vehicles (hybrid and LPG cars)
Up to 100 £0 £0
101-110 £20 £10
111-120 £30 £20
121-130 £130 £120
131-140 £155 £145
141-150 £170 £160
151-165 £210 £200
166-175 £250 £240
176-185 £275 £265
186-200 £315 £305
201-225 £340 £330
226-255 £585 £575
over 255 £600 £590

How to pay your road tax

You can use a credit or debit card to pay for your road tax, or you can set up a Direct Debit.

Direct Debit payments can be annually, twice a year or monthly, but there’ll be a 5% surcharge for paying bi-annually or monthly.

You’ll need a tax reminder letter (V11) or your car’s logbook (V5C). If you don’t have the logbook yet, you’ll need the green new keeper slip.

Most people pay for their road tax online, but you can also take your reminder or logbook to the Post Office to do it.

How do I cancel my road tax?

If you sell your car or declare a SORN to keep it off the road you can cancel your road tax to get a refund for any full months of tax you have remaining.

You can tell the DVLA online if you’ve sold your car and need a tax refund.

Once you’ve done that, or declared a SORN, your unused car tax will be refunded automatically by a cheque sent to you.

You might also need to cancel it for a refund if:

  • Your car’s written off in an accident
  • You scrap it
  • It gets stolen
  • You export it out of the UK
  • You have it registered as exempt from vehicle tax (for example because you have a disability)
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