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2021 car tax (VED) increases

Vehicle excise duty (VED), better known as car tax, increases in line with inflation every year. The amount of car tax you pay is based on the CO2 emissions – with more polluting vehicles paying more tax.

In April 2020, emissions tests changed from NEDC to WLTP – which produced more accurate, but higher, readings. As such, many drivers started paying more tax.

You can learn more about WLTP tests here.

This year, WLTP test results will be used again. The amount of tax you’ll pay will be as follows:
Car tax rates 2021
The standard rate (second year onwards) for cars registered on or after 1 April 2017 will be £155 a year for anything other than zero-emissions vehicles.

Zero emissions vehicles, like fully electric vehicles and hydrogen fuel cells cars will remain exempt from paying car tax. This may change in future years, as sales of new petrol and diesel vehicles will be discontinued from 2030.

Additional rate changes

As with previous years, you’ll have to pay an additional tax rate for cars that cost more than £40,000. From April 2021, this will rise to £335 a year, and will be charged annually for five years, starting after your first-year tax runs out.
Learn more about how car tax bands work.

VED for used cars

Cars registered after 1 March 2001 and before 1 April 2017, car tax will be calculated solely on carbon emissions (measured in g/km) in different brackets. The new standard annual rates will be as follows:

Up to 100 g/km – £0
101-110 g/km – £20
111-120 g/km – £30
121-130 g/km – £130
131-140 g/km – £155
141-150 g/km – £170
151-165 g/km – £210
166-175 g/km – £250
176-185 g/km – £275
186-200 g/km – £315
201-225 g/km – £340
226-255 g/km – £585
Over 255 g/km – £600

2021 company car tax (BiK) increases

BiK tax payments will resume in the next financial year, starting 1 April 2021. BiK had previously been frozen from 1 March 2020.

This year, you’ll have to pay BiK on electric and hydrogen fuel cell cars for the first time. They have been added to the one percent tax bracket for the 2021/2022 financial year.

2021 fuel duty changes

Fuel duty rates will remain frozen for the next financial year.

You pay fuel duty tax on petrol and diesel. Since March 2011, the fuel duty rate has been 57.59 pence per litre, which (depending on the total price of your fuel) constitutes about half of the cost of refuelling.

2021 Clean Air Zone changes

Plans to introduce Clean Air Zones (CAZ) to various parts of the UK were delayed due to the COVID-19 coronavirus pandemic. We’re keeping track of where and when they’re due to launch in our dedicated guide to low emission zones.

The UK’s existing Clean Air Zone is in London and is called the Ultra-Low Emission Zone (ULEZ). To enter ULEZ, you’ll currently need to pay £12.50 on top of any congestion charge fees.

These charges were introduced to incentivize the adoption of cleaner vehicles and improve air quality in cities.

ULEZ fees were not featured in this year’s Budget. ULEZ will increase in size though. From 25th October 2021, the ULEZ area will expand up to the North and South Circular ring roads but stop short of including them.