Car tax bands explained

Last updated: 1st April 2019
We’re sorry to say that road tax is one of the costs that comes with owning a car. And the rules keep on changing. After the big changes on April 1 2017, some new rules came into force on 1 April 2018 and 1 April 2019, which include higher rates for higher polluting diesel cars.
What is car tax, or Vehicle Excise Duty?
Vehicle Excise Duty, or VED, is also known as vehicle tax, car tax, showroom tax, and road tax. It’s a tax which must be paid for most vehicles, which will be used or parked on public roads in the UK. The concept of VED was introduced all the way back in 1920.
How much road tax do I have to pay?
For the first year of tax, the amount is calculated differently to consequent years, and it’s based on the car’s CO2 emissions. From 1 April 2018, diesel cars which do not meet new emissions standard moved up one car tax band.

Cars with 0g/km of CO2 emissions have to pay nothing in the first year, compared with cars emitting more than 255g/km, which will now have to pay £2,135 in the first year.

However, the first year's road tax is covered in the car's 'on-the-road' price, so it's absorbed into the overall cost of the car, rather than you having to shell out up to £2,135 on top of everything else.
From the second year onwards, you pay one of three standard rates based on the car’s fuel type:

1. For petrol or diesel vehicles, you pay £145 a year.
2. For alternative fuel vehicles (hybrids, bioethanol, liquid petroleum gas), it’s £135 a year.
3. Fully electric cars pay £0.

On top of that, if the car has a manufacturer’s list price of over £40,000, you’ll have to pay a new additional rate of £320 on top of the standard rate for five years. After this, the vehicle will be taxed only at the standard rate for that type of vehicle.
Why did the government change the car tax system?
The government says the changes address unfairness in the current system, as reductions in the average CO2 emissions of cars mean owners of newer cars are paying less than owners of older cars.

It also says the supplement on cars of more than £40,000 will ensure those who can afford the most expensive cars make a fair contribution.

Related: Complete guide to company car tax for employers.
Are any cars exempt from the new car tax system?
As before, the changes clearly incentivise the purchase of zero-emission cars, such as the all-electric Nissan Leaf and Renault Zoe, and hydrogen-powered Toyota Mirai. These will continue to pay zero road tax.
What models have seen big car tax increases?
The 2017 changes resulted in some models seeing big jumps in their running costs – particularly cars with low emissions.

Before 2017, the Volvo XC90 T8 (a plug-in hybrid with emissions of less than 50g/km) paid no VED. Under the new system, the £10 first-year rate will be followed by annual bills of £465 (the flat rate of £145, plus the £320 supplement for cars with a list price of more than £40,000) for five years.
Even the zero-emission, all-electric Tesla Model S saw its running costs jump after April 2017. Although the car’s emissions mean it is exempt from VED, its list price means it is subject to the £320 annual supplement.

Cheaper low-emission cars have jumped in cost too. Any car with CO2 emissions of less than 100g/km paid no VED before April 2017, but under the new system, a car with emissions between 91 and 100g/km will pay £130 in its first year, followed by £145 each year after that.
Have all cars seen a road tax increase?
No. Some cars will see almost no penalty under the new 2017/2018 system. For example, the high-performance Audi TT S has CO2 emissions of 168g/km and a list price just under £40,000. Under the pre-2017 system, its VED costs £300 in the first year, followed by annual bills of £210. Under the new system, the first year bill is higher – at £500 – but this is followed by annual bills of £145, so it only takes three more years for the overall VED bill to be lower.
Think carefully about options when you’re buying a new car
As the rate of VED is calculated on the list price of a car, that means the price includes any options you add. So if you’re buying a £39,000 car, and pop a few extras on, you could send its price over £40,000, and have to pay the £320 supplement.
Used car buyers also need to consider the new car tax rules…
The road tax rules that came into force in 2017 mean that used car buyers need to shop carefully, as the date a car is registered could have an important effect on its value. A car registered on 1 March 2017 could cost less to run than an identical car registered a month later, making the older car more valuable.