Vehicle Excise Duty - how much tax will you pay each year?
How has the 2015 Budget affected how much road tax you will pay?
Vehicle Excise Duty (VED), or car tax as it's more commonly known, is a yearly payment drivers have to make to the government that allows them to continue to drive and park their car on UK roads.
While it's by no means the biggest cost associated with running a car, it can certainly influence your choice of model. This is because cars fall into different road tax bands, so the amount you pay each year can range from nothing at all to more than £500.
It was announced in the 2015 Summer Budget that VED would effectively be ring-fenced, with the money raised going directly to pay for roads.
New car tax bands
Vehicle tax bands are determined by the amount of carbon dioxide your car produces for every kilometre travelled. If you know this figure, you can easily find out how much car tax you’ll have to pay each year.
As a general rule of thumb, the more CO2 your car emits, the higher the road tax bracket it’ll fall into, and the more you will have to pay each year. However, if your car is electric, hybrid, or produces less than 100g/km of CO2, you will currently not have to pay any road tax at all.
The table below shows the yearly road tax rates announced as part of the 2015 Budget, and are applicable from 1 April 2015.
|CO2 Emissions in g/km (tax band)||Annual rate|
|Up to 100 (A)||£0|
|Over 255 (M)||£505|
For cars registered before 1 March 2001, a different tax system applies. In this instance, the amount of tax payable is determined by how big the car's engine is. The larger the engine, the more tax will have to be paid.
Road tax can be paid in a number of ways, including monthly and bi-annual instalments. As of 1 October 2014, tax discs are no longer required to be displayed in car windscreens, as the system has been computerised.
If you’re planning to buy a new car, the amount of tax you pay in the first year could vary slightly from the amount you pay in subsequent years. Normally, the amount payable in the first year of ownership is included in the cost of buying the car. This is why car magazines and dealers tend to refer to a car's ‘on-the-road’ or ‘OTR’ price.