UK road tax rules for 2021 explained
We explain how the current Vehicle Excise Duty system works and what it means for UK motorists
Known officially as Vehicle Excise Duty (VED), the current ‘car tax’ or ‘road tax’ system for new cars is split into two parts. In their first year, new cars attract a wide range of tax - from £0 to £2,245 - based on their CO2 emissions. All cars then move to a flat annual rate for the second year onwards.
For drivers of petrol and diesel cars registered after 1 April 2017, that flat annual rate increased by the rate of inflation for the 2021/22 tax year to £155. There were also inflation-based increases for first-year VED rates for cars registered from 1 April 2021.
We’ve listed annual and six-monthly VED charges for 2021/22 below. If you want to pay on a monthly basis then you’ll have to pay an additional fee.
Annual Vehicle Excise Duty
It’s rare that a year goes by without VED increasing but the hike in April 2021 wasn’t too drastic. The annual flat rate of road tax for 2021/22 was set at £155 for petrol and diesel cars registered from April 2017, a modest increase from £150 in 2020/21.
The annual flat rate of road tax for hybrid vehicles - including mild hybrid and plug-in hybrids (PHEV) - has gone up to £145, which is also an increase of £5 on 2020/21. This is referred to as the Alternative Fuel Vehicle (AFV) rate, and it also applies to cars powered by bioethanol or LPG (liquid petroleum gas).
The £40,000-plus car tax surcharge
There’s a VED surcharge payable on cars costing more than £40,000 when new, which stands at £355 from 1 April 2021. This is up from £325 in 2020 and must be paid annually on top of the standard flat rate. This payable for five years from the second year of registration; at six years old, the car reverts to the standard flat rate.
There’s good news if you’re driving a zero-emissions model, as they’re exempt from the surcharge.
2021 annual VED flat rates for cars registered after April 2017
Tax class | 12 months | 6 months |
Petrol/diesel cars | £155 | £85.25 |
Alternative Fuel Cars | £145 | £79.75 |
Including £335 luxury car tax surcharge | ||
Petrol/diesel cars | £490 | £269.50 |
Alternative Fuel Cars | £480 | £264 |
2021 first year VED rates
Car-tax rates are used as one way to incentivise the purchase of greener cars.
The first-year rates start from £0 for zero-emission cars and AFVs that emit less than 50g/km. The most polluting cars are hit the hardest, with those emitting 255g/km of CO2 or more costing £2,245 in the first year. All other models fall somewhere between the two extremes.
Compared to the first-year rates for petrol cars and diesel cars that meet RDE2 emissions standards, AFVs are eligible for a £10 discount. Diesel cars that don’t meet RDE2 emissions (meeting this standard was mandatory from 1 Jan 2021, so only unregistered diesel cars built before this date) pay more on a sliding scale.
When you buy a new car, the first year of road tax will be included in the car’s on-the-road (OTR) price, so you don’t need to worry about paying the tax separately.
First year VED bands for cars registered after 1 April 2021
Petrol and RDE2 diesel cars | Non-RDE2 diesel cars | Alternative Fuel Cars | |
g/km CO2 | 12 months | 12 months | 12 months |
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 |
How to check car tax online
The increases may have been relatively modest for the 2021-2022 tax year but there’s no escaping the fact that some buyers face eye-watering road tax bills. That’s why it’s important to check what a prospective purchase will cost you in tax for the time you plan to own it.
If you’re taxing a used car, the Driver and Vehicle Licensing Agency (DVLA) website allows you to check how much you need to pay by registration number, so you can avoid being caught out.
While business drivers don’t usually have to pay their own road tax, they do need to know about Benefit-in-Kind (BiK) rates. These are the figures used to calculate company-car tax and we've created a guide to how the system works.
Car tax rates for older cars
Owners of older cars continue to pay annual road tax as per the rules of the previous tax structures, albeit with a slight rise due to inflation. The previous systems were split into two separate periods; cars registered between 1 March 2001 to 31 March 2017 were taxed based on CO2 emissions, and cars registered before 1 March 2001 were taxed based on engine size.
VED rates for 2001 to 2017-registered cars
Petrol and diesel cars | Alternative Fuel Cars | ||||
Band | g/km CO2 | 12 months | 6 months | 12 months | 6 months |
A | 0-100 | £0 | - | £0 | - |
B | 101-110 | £20 | - | £10 | - |
C | 111-120 | £30 | - | £20 | - |
D | 121-130 | £130 | £71.50 | £120 | £66 |
E | 131-140 | £155 | £85.25 | £145 | £79.75 |
F | 141-150 | £170 | £93.50 | £160 | £88 |
G | 151-165 | £210 | £115.50 | £200 | £110 |
H | 166-175 | £250 | £137.50 | £240 | £132 |
I | 176-185 | £275 | £151.25 | £265 | £145.75 |
J | 186-200 | £315 | £173.25 | £305 | £167.75 |
K | 201-225 | £340 | £187 | £330 | £181.50 |
L | 226-255 | £585 | 321.75 | £575 | £316.25 |
M | 255+ | £600 | £330 | £590 | £324.50 |
VED tax bands for cars registered before 1 March 2001
If your present car was registered before 1 March 2001, it falls into one of two bands based on engine size, making it easy to work out your annual bill.
If your car has an engine less than 1,549cc in capacity, it’s liable for annual VED of £170. Meanwhile, if you have your sights set on an older car with more power, even exotic sports cars or big SUVs cost just £280 to tax if registered before 1 March 2001. The same car registered after that could easily cost twice as much in tax.
Since 1 April 2017, all cars over 40 years old are considered to be historic vehicles and aren’t liable for VED.
Driving without tax
If you’re caught driving a car without road tax, you could receive a severe fine. If you’re stopped by police at the roadside, they have the power to confiscate your vehicle. You can check if your car is taxed on the DVLA’s website to make sure.
When buying a new car, you need to tax it before driving away, as there’s no ‘grace period’. You can tax a car online or by calling the DVLA, ensuring you have the logbook (V5C) or new keeper slip (V5C/2) handy so you can obtain the vehicle’s unique reference number. If you have a car you want to keep in storage and not drive, you can cancel its road tax by making a SORN (Statutory Off-Road Notification), which is valid for 12 months.
Road tax refund
The disappearance of the tax disc in 2015 brought with it a significant change; previously, if the tax disc of a car for sale hadn’t yet expired, it could be sold along with the car. With tax already in place, this made it simple for a buyer to simply arrange insurance over the phone to drive away legally in their new car.
It’s no longer possible for road tax to be transferred to a subsequent owner. Instead, it’s up to the owner to apply for a refund of any remaining tax (allow up to six weeks for it to be processed). It’s also up to the buyer to tax the car themselves immediately; you can do this online through a relatively simple process and it’s still possible to visit a Post Office to arrange your car tax.
Pay road tax online
It's now possible to pay your road tax with a monthly Direct Debit, while the annual and six-monthly payment options continue. The DVLA automatically sends out renewal reminders (called V11 forms), so remembering to tax your car is easy, despite the fact there are no longer tax discs. V11 forms also have a Direct Debit form to fill in on the back, which you can then take to a Post Office if you’d rather not pay online.
Do you want to know more about buying a new car? Read our guide for our top tips or read our explanation on how to finance a new car.
