Vehicle excise duty (VED), or better known as car tax, increases with inflation every year. The amount of car tax you’ll pay is dependent on how much pollution your car emits and the amount of CO2 emissions your vehicle produces.
For most car drivers, you'll find your tax has increased year-on-year from £150 to £155 - this is a 3% increase which is significantly higher than the UK’s 0.8% inflation rate. However, drivers of new vehicles with the highest emissions will pay £70 more in the first year.
If you own a pure electric vehicle then you’re in luck, from the 1 April 2021 pure electric vehicles will continue to be exempt from VED.
However, if your vehicle costs more than £40,000 you will be subject to pay £355 a year for years two to five (a total of £1675) on top of the standard rate of VED for the vehicle. You will also have to pay more if you own a diesel vehicle due to them not meeting the RDE2 emissions standards.
First-year car tax rates from 1 April 2021
|CO2 emissions (g/km)||First Year Rate||First Year Rate (Diesel)|
If you bought your car before 1 April 2017 or you’ve purchased a used car that was registered before that date, the amount of car tax you pay will depend on the car’s emissions. Below are the rates for vehicles that fall into this category.
Car tax rates for cars registered between 1 March 2001 and 31 March 2017
|VED band||CO2 Emissions (g/km)||Annual rate|
|A||Up to 100||£0|
|M||More than 255||£600|
Why you still have to apply to tax your tax-free car
Owners of cars who qualify for free VED must still apply for road tax, despite not having to pay anything towards this. Many low-emissions cars that were first registered before 1 April 2017 and emit up to 100g/km of CO2 qualify for free VED. However, these car owners will still receive an annual renewal reminder and must apply for road tax - if you ignore the renewal notice, you’ll run the risk of a fine upto £1000.
To check the due-date on your car tax, login to your MotorEasy account, where you'll find a reminder at the top of the Dashboard page.