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Vehicle Tax: Your Complete Guide

  Wednesday, 21 September 2022

Some time has passed since the tax disc revolution of 2014, when the traditional UK method of displaying your car tax as a paper disc was replaced in a governmental cost-cutting measure. The DVLA projected that removing the print and postage costs for the old tax disc would save around £10 million each year.

But there have been developments since then, which are important to all drivers. We’ve put together an up-to-date guide on vehicle Vehicle Excise Duty (VED), better known as car or vehicle tax, to provide clarity to our driving readers, old and new.

How is car tax (VED) calculated?

Ultimately, the car tax you pay will differ depending on how environmentally friendly the car is. That’s because the amount of tax you pay on your vehicle is based on the amount of carbon dioxide (CO2) it emits into the atmosphere.

The rates are variable, divided into bands from ‘A’ to ‘M’. Each band signifies the amount of emissions allowed by the vehicle, plus the first year tax rate and annual rate after the first year. ‘A’ is the band for vehicles with the least CO2 emissions, all of which are currently completely exempt from car tax.

Car tax for older vehicles

Cars which were registered before 1st March 2001 are taxed rates based on engine size. Generally, those with engines smaller 1549cc pay £145 per year while larger models require a yearly payment of £230.

But after 1st April 2015, a rolling 40-year car tax exemption for classic vehicles has been established. In other words, if your vehicle was built 40 or more years ago at the time when April rolls around each year, it should fall under this exemption.

What are the current vehicle tax rules?

  • Diesel cars from 1 April 2018 are charged a higher first year rate unless they meet RDE2 emission standards*
  • All cars registered from 1 April 2020, the first year rate is likely to be higher than previous years, as official CO2 measurements have risen due to changes in official tests
  • The standard rate kicks in after the first year. From April 2021, drivers pay £155 for petrol and diesel cars and £145 for hybrids and alternative fuel cars
  • Zero-emission cars (such as electric vehicles) are exempt from car tax
  • The £40,000 rule. Vehicles bought at over £40,000, including zero-emissions vehicles, pay a supplementary £335 per year for five years after registration on top of the standard rate
  • Zero-emission cars are exempt from the £40,000 rule as of 1 April 2020. This includes existing owners. New rules are not being backdated to older cars

* RDE stands for Real Driving Emissions. This is the test that can be used by vehicle manufacturers to test the emissions a car produces under real driving conditions. RDE was introduced in September 2017 and was made mandatory for all new cars from September 2019.

How do I check my vehicle is taxed?

It’s easy to confirm whether the car you’re driving is paid up in vehicle excise duty. If you’re unsure about a rental car, or simply want to check your own tax status, you can use the make of car and registration details to find your tax information at gov.uk.

How can I pay for vehicle tax?

Motorists are expected to pay vehicle tax in advance through the DVLA. Payment via direct debit is also a possibility, in annual, biannual, and monthly payments. It’s worth noting, however, that biannual and monthly transactions come with a 5% surcharge.

What happens to vehicle tax when I buy or sell?

Previously, leftover tax on used cars would transfer to the new owner on purchase. However, this is no longer the case. When buying a car, it is expected you will complete its taxation procedures immediately via the DVLA website or a Post Office. Sellers, meanwhile, will instead receive a full refund for any of the months remaining.

Sellers beware of timing; you will only be refunded car tax for full calendar months. Making a transaction one week into a given month will entail taxing the vehicle for the whole of that month, regardless.

How are tax evaders caught?

The car tax status of any vehicle can now be checked online using the make and registration details. Where enforcement agents could previously perform a simple inspection of paper vehicle tax discs, checks are now performed entirely digitally. The police, the DVLA and other agencies utilise automatic number plate recognition cameras (or ANPR cameras) linked with a nationwide electronic vehicle register. Physical checks are truly a thing of the past.

ASM can help you find the best used car

This guide should help you if you have problems with your used car. We have plenty of other guides to help you on our blog.

Are you already on the hunt for your next car? ASM Auto Recycling has consistently healthy stock of repairable vehicles, offering regular online auctions supported by our site in Thame, Oxfordshire. For help buying used cars at online auctions, read our full guide.

As an Authorised Approved Treatment Facility, we can also take unwanted used cars to be scrapped, recycled, and resold where possible. Contact us today to discuss your needs.

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