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7 December 2020

Car tax explained

Updated to include coronavirus information and the latest tax changes from April 2020. We show how much you'll need to pay and which cars are exempt from car tax.
Car tax
Adrian Porter

From April 2020, those buying a new petrol, diesel or hybrid car will likely have to pay more car tax. But those buying expensive electric cars, costing more than £40,000, will now be exempt from a rule that previously saw them paying a tax supplement.

COVID-19 update: Do I need to pay car tax during the coronavirus UK lockdown? In short, yes. Unless you SORN your car. For more details see our guide on coronavirus and car tax.

Can I drive during coronavirus? See your COVID-19 car related questions answered here.

Away from coronavirus, below we lay out everything you need to know about the different car tax rates and rules, and what you'll be paying.

Looking to buy a car? Head straight to our new and used car reviews.

How do I check my car's first registration date

The rate of car tax you'll pay is based on the date the car was first registered. This is not always the same date you bought the car, if you bought it used.

The first registration date can be found in your car's V5C document (your proof of ownership document). But to save you digging that out, the easiest way to check is to go to the DVLA's get vehicle information service and enter your registration.

This free service will reveal the car's first registration date along with other useful information, such as when the MOT is due to expire and the car's European emission status (eg Euro 6).

How do the current car tax rules work?

These rules apply to all cars that were first registered after 1 April 2017.

  • The 'first year rate' is based on CO2 emissions, broken down into a number of bands.
  • For diesel cars from 1 April 2018, owners are charged a higher first year rate unless they meet RDE2 emission standards.
  • For 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. It's £150 for petrol and diesel cars and £140 for hybrids and alternative fuel cars.
  • Zero-emission cars (such as electric vehicles) are exempt from car tax.
  • If your car cost more than £40,000 when bought new, you have to pay an extra £325 per year for five years, on top of the standard rate.
  • Zero-emission cars are now also exempt from the £40,000 rule as of 1 April 2020. This includes existing owners.
  • New rules are not being backdated to older cars, they will continue along the previous tax system.

Below we explain the post-2017 rules in more detail, or you can skip straight to the table of car tax rates.

Wondering if you should buy an electric car? The worst we've seen are impractical and unreliable, but the best have a decent range and are worth buying. Find out which electric cars we recommend by checking out our round-up of the best electric cars.

Car tax rates for cars first registered after 1 April 2017

Low-emission cars (producing up to 100g/km CO2) registered before 1 April 2017 were not liable for car tax. For cars registered from 1 April 2017, this exemption no longer applies. In addition, cars that cost over £40,000 must pay an 'expensive car supplement' of £325 a year for five years. 

There are two main rates for cars that were registered as new after 1 April 2017:

  1. The first-year rate is based on the amount of CO2 (carbon dioxide) your car produces.
  2. After that, a standard rate applies. Petrol and diesel car owners will pay £150; it's £140 for alternative-fuel cars such as hybrids. This assumes you pay as a single, 12 month payment; rates are a little higher if you pay in instalments.

How much is car tax for diesel cars?

Anybody who buys a new diesel car that doesn’t comply with RDE Act 2 (RDE2) emission testing pays a higher amount of car tax in the first year of ownership.

New RDE tests came into force in September 2017, but not all new cars had to comply with these new testing procedures until 1 September 2019. Find out more about official tests and how our tests compare by going to how we test mpg and emissions.

The rules are not being back dated; it only affects those buying a new diesel car that was first registered on or after 1 April 2018.

Are hybrid cars cheaper to tax?

The rates are slightly different for owners of 'alternative-fuel' cars. These are vehicles that do not run purely on diesel or petrol and include:

  • Hybrids
  • Plug-in hybrids
  • Liquefied petroleum gas (LPG) cars
  • Compressed natural gas (CNG) cars
  • Biofuel cars (bioethanol or biodiesel)

Drivers of alternative fuel cars pay £10 less than petrol and diesel owners in the first year. They then pay £140 every year after.

Why did car tax rates go up from April 2020?

Actually, they didn't. Although someone buying a new car first registered from April 2020 could pay more car tax in the first year compared with someone who bought exactly the same car before April 2020. It's not because rates have increased, but because the way CO2 is measured has changed.

As of April 2020, first-year car tax is calculated based on Worldwide-harmonised Light vehicles Test Cycle (WLTC) test results for CO2 emissions. Previously, it was calculated on the less representative New European Driving Cycle (NEDC) test, which gave less realistic (and typically lower) CO2 emissions. 

We explain the differences between both sets of official tests, plus how our own tests compare, in our guide to how we test mpg and emissions. In a nutshell: WLTP tests are much more true to real-life driving conditions.

First-year car tax rates, which are based on official CO2 emissions, are now being adjusted for the change. This means new owners are likely to pay more.

As an example, if testing had continued under the old, NEDC test, which measured a car as producing 135g/km CO2, the owner would pay £215 in their first year.

However, if that same car was bought after April 2020 and its official CO2 output had been adjusted to 155g/km following the adoption of WLTP CO2 values, the owner of that same car would have to pay £540 as it has moved up to the next band. That's an increase of £325.

The standard rates that apply from the second year of a car's life onwards are unaffected.

What are the current car tax rates?

The table below shows the current car tax rates. The second-year rates apply to cars first registered on or after 1 April 2017.

Tax rates for petrol and diesel cars from April 2020

CO2 emissions First-year rate First-year rate for diesel cars* Standard rate** - from second year onwards
0 £0 £0 £0
1-50 g/km £10 £25 £150
51-75 g/km £25 £110 £150
76-90 g/km £110 £135 £150
91-100 g/km £135 £155 £150
101-110 g/km £155 £175 £150
111-130 g/km £175 £215 £150
131-150 g/km £215 £540 £150
151-170 g/km £540 £870 £150
171-190 g/km £870 £1,305 £150
191-225 g/km £1,305 £1,850 £150
226-255 g/km £1,850 £2,175 £150
Over 255 g/km £2,175 £2,175 £150

*For diesel cars that do not yet comply with RDE Act 2 (RDE2) emission testing. ** Assumes single 12 month payment

Tax rates for alternative fuel cars (hybrids, LPG, CNG, biofuel) from April 2020

CO2 emissions First-year rate Standard rate - from second year onwards
0 £0 £0
1-50 g/km £0 £140
51-75 g/km £15 £140
76-90 g/km £100 £140
91-100 g/km £125 £140
101-110 g/km £145 £140
111-130 g/km £165 £140
131-150 g/km £205 £140
151-170 g/km £530 £140
171-190 g/km £860 £140
191-225 g/km £1,295 £140
226-255 g/km £1,840 £140
Over 255 g/km £2,165 £140

What is the £40,000 car tax rule?

After the first year, owners of cars that cost more than £40,000 have to pay an additional annual supplement of £325 for five years – adding up to £1,625 in total. 

This £40,000 rule initially applied to all cars, including zero-emission cars that otherwise paid no car tax. So if you bought a brand new Tesla Model X (an electric car that costs from £75,000), for instance, you used to have to pay this supplement during the second to sixth year of ownership. 

However, it was announced in the 2020 Budget that zero emission cars bought before 31 March 2025 would no longer have to pay that supplementary rate.

Unusually, this exemption from the supplement also applies to existing owners.

Tax rates for cars that cost more than £40,000

Here's what you'll pay for a car costing over £40,000 during years two to six.

Fuel type Standard annual rate Additional rate Total annual payment
Petrol/diesel £150 £325 £475
Alternative £140 £325 £465

What were the previous car tax rules?

Any cars first registered as new after 1 March 2001, but before 1 April 2017, continue to be taxed at their previous, respective rates. These are based on official CO2 emissions, with one caveat.

It was announced in the 2017 Spring Budget that, from April 2017, these rates will increase in line with the RPI (Retail Price Index).

The amount of CO2 your car produces puts it into one of the following bands. These bands have a letter assigned to them, from A to M. Cars in band A emit the least amount of CO2, and are currently exempt from paying any car tax throughout the life of the car.

The rates below show the price if you choose to make a single payment for the year, and show the current rates (from 1 April 2019). 

You can choose to set up a direct debit to pay monthly, or pay a single payment every six months. But if you choose either of these options, you will end up paying more.

Previous tax rates for alternative-fuel cars

Alternative-fuel cars are those that do not run purely on diesel or petrol, such as hybrids.

The car tax rates for alternative-fuel cars simply cost £10 less than for regular petrol or diesel combustion cars; to get the rate for your car, deduct £10 from the rate in the table.

Pre-April 2017 car tax rates explained

Car tax band CO2 emissions First year rate Annual rate after first year
A Up to 100 g/km £0 £0
B 101-110 g/km £0 £20
C. 111-120 g/km £0 £30
D 121-130 g/km £0 £125
E 131-140 g/km £130 £150
F 141-150 g/km £145 £165
G 151-165 g/km £185 £205
H 166-175 g/km £300 £240
I 176-185 g/km £355 £265
J 186-200 g/km £500 £305
K 201-225 g/km £650 £330
L 226-255 g/km £885 £565
M. Over 255 g/km £1,120 £580

*Band K includes cars that have a CO2 figure over 225g/km but were registered before 23 March 2006. Annual rate after first year assumes single 12 month payment.

These car tax rates apply to cars registered from 1 March 2001. Cars registered before this date are charged based on their engine size; those with engines smaller than 1549cc pay £160 a year and others pay £265 a year.

A rolling 40-year car tax exemption for classic vehicles applies from 1 April 2015. It means any vehicle built 40 or more years ago will be exempt from car tax on an automatic rolling basis on 1 April each year.

Not sure whether your next car should be diesel or petrol? Use our petrol or diesel calculator to find out which will cost you less.

Am I be better or worse off under the newer system?

To show how the post-April 2017 car tax system compares to the previous car tax system, we've compared rates on a selection of cars with CO2 levels ranging from low to high. All cars are for example purposes only and some have greener engines available. All models listed cost less than £40,000.

Table notes: Correct as of 1 April 2019. *Alternative fuel rates apply. **Higher first year rate for diesel cars applies

 Excluding zero-emission cars, which pay no tax at all, lower-emission cars typically pay relatively more (for the same car type) under the new system from the outset. Higher-emission car owners pay more in the short term, but may be better off in the longer term. 

For example, under the current system, you would pay £1,215 of car tax over 10 years for the the Toyota Prius Plug-in hybrid. The cleanest car in the table, it has a remarkably low CO2 figure of just 28g/km. 

Under the previous system, it would have been exempt from car tax thanks to its low emissions.

The Ford Ranger has the highest CO2 figure, emitting 231g/km of CO2. Under the current system, its owners will pay £3,440 over 10 years, noticeably more than the Prius Plug-in. 

However, under the older system, owners pay £5,880 over the same period, meaning that anyone buying a more polluting car today saves £2,440 compared with the older system.

Do I need a tax disc?

Since 1 October 2014, you are no longer required to display a tax disc in the windscreen of your car.

This did not, sadly, mean the end of annual car tax, but it does have implications for buying and selling cars.

  • If you buy a used car: any remaining car tax can no longer be transferred so you need to tax the car before you can use it.  
  • If you sell a car: you will get an automatic refund for any remaining car tax – provided you have notified the DVLA of the sale.

However, you will only be refunded for any full calendar months remaining. That means if you sell your car one week into the month, both you and the new owner will effectively have to tax it for the remainder of that month.

Now you're up-to-date with the new car tax rules, find your perfect new car by using our independent tests and expert research to compare the best cars.

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