Confused by your road tax? Let's make it simple!
Road tax isn’t quite as simple as it used to be. We’ve said goodbye to the old tax disk, and now have a tax system with 13 bands based on emission rates. So, to make things a little easier for you, we’ve prepared this handy guide to help you work out your road tax rate and stay in HMRC’s good books.
How is my car tax rate worked out?
As part of the drive towards an eco-friendly future, all cars registered after March 2001 are subject to a tax structure based on CO2 emission rates. These cars fall in to one of 13 tax sub-categories (labelled ‘A’ to ‘M’), with tapering charges for more frugal petrol and diesel models.
If your new car emits CO2 at less than 100g/km, it will be classified as ‘Band A’ and you won’t have any tax to pay. However, if the car falls into ‘Band M’ (emissions of 255g/km or more), then you’ll be expected to stump up £500 each year.
There are also incentives for people who are deliberating over what car to buy next. Any models rated from ‘Band A’ to ‘Band D’ will be exempt from tax for a year. On the flip-side, ‘Band M’ cars will be subject to a tax rate of around £1,100 for the first 12-months.
Cheapest petrol/diesel cars to tax
All sound a little complicated? Here’s some examples of our most popular models with either no or very low tax rates:
- Citroën C3: The car fell four tax bands back in 2012 and is now completely tax free.
- Ford Fiesta: The new ECOnetic is the cleanest Fiesta ever and emits just 82g/km.
- Fiat 500: Regular eco award winners, the entire Fiat range has an average rate of 118g/km.
- Kia Rio: Having had to play catch up, Kia now has six cars in bands ‘A’ – ‘C’, including the Rio with an emissions rate of 85g/km.
Not only are cars that run on an alternative fuel source less likely to meet the emissions threshold for a higher tax rate, they’ve also been given their own dedicated banding system. Still based on the ‘A’ to ‘M’ structure, tax charges are reduced across the board. A ‘Band B’ car is subject to a rate that’s half that of petrol or diesel models, while a ‘Band C’ is charged at 66%.
Cars registered pre-2001
Owners of cars registered before March 2001 don’t have things quite so rosy. These vehicles are charged Vehicle Excise Duty based on the size of their engines. Fortunately, the government have kept things nice and simple, with only two categories to choose from. A car with an engine larger than 1,549cc is charged £230 in road tax each year, while anything below this level will cost £145.
While the money you could potentially save on insurance and maintenance with a company car is an alluring proposition, HMRC has been true to form and turned up to spoil the fun. Tax rates are far-and-away more complicated and expensive than those for privately owned vehicles.
For company cars, the tax rate is no longer flat-rate and is instead based on a figure calculated depending on factors relating to the car’s eco-credentials, P11D value (the car’s government authorised list price) and your salary. The emission rate will determine what percentage of the P11D value is charged (e.g. a car that emits 76-94g/km of CO2 will be charged 11% of the car’s listed price), with diesel cars subject to an additional 3% hike over petrol models, although the maximum rate is set for each at 35%. This figure is called the ‘Benefit in Kind’ (BIK) rate.
However, you’ll only end up paying a portion of this figure each year, which is determined by your annual salary. People earning less than £31,865pa will be charged just 20% of the BIK rate, while those earning over that figure will be charged 40%. The top bracket is for those earning over £150,000pa, who get charged at 45%.
How do I make sure that my car is taxed?
The old tax disc system was just six years shy of its centenary when it was phased out from 1 October 2014. The new digitised system promises to be far more convenient in the long run, however it has come with its fair share of teething problems.
All vehicle information is now stored on the DVLA’s vehicle register, which can be accessed by everyone from the police, to insurers, to members of the public. You can therefore check online to see when your tax will need renewing. However, if you’re not particularly tech savvy, you’ll also receive a letter to prompt you. You can also now choose to spread your tax into more manageable monthly payments.
One less welcome change comes in to play if you’re selling your old car, or buying a used car. Unlike in the past, tax can no longer be passed between owners. This means that you’ll need to make sure that tax is paid on a used car as soon it is purchased, complicating matters further. But, at least you’ll get a full refund from the DVLA for any remaining months that have been paid in full when selling a car.