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Understanding Car Tax in the UK
Car tax, officially known as Vehicle Excise Duty (VED), is a mandatory charge for most vehicles driven or parked on public roads in the UK. The amount you pay depends on various factors, including your vehicle's CO2 emissions, fuel type, and the date of first registration.
Car Tax: The Key Points
1. CO2 emissions and fuel type
The primary determinant of car tax rates is the vehicle's CO2 emissions. Generally, the higher the emissions, the higher the tax. This system encourages the use of more environmentally friendly vehicles. Different rates apply to petro, diesel, and alternative fuel vehicles. Diesel vehicles, for instance, often incur higher charges due to their higher emissions.
2. First-year rate
When you buy a new car, you pay a first-year rate based on the vehicle's CO2 emissions. This rate can vary significantly, with zero-emission vehicles previously being exempt.
3. Standard Rate
After the first year, most vehicles pay a standard annual rate. This rate is adjusted periodically, often in line with inflation.
4. Premium car surcharge
Vehicles with a list price over £40,000 incur an additional surcharge for the first five years after the first registration. This surcharge is intended to ensure that luxury vehicles contribute more to road maintenance and environmental initiatives.
Why do we pay car tax?
Car tax is crucial for several reasons:
- Revenue Generation
It provides essential funds for maintaining and improving the UK's road infrastructure.
- Environmental Impact
By linking tax rates to emissions, it incentivises the use of cleaner, more efficient vehicles.
- Fairness
It ensures that all road users contribute to the costs associated with road use and maintenance.
Road Tax Changes in April 2025
The main change is that electric vehicles will no longer be exempt from VED. This is to help with the ongoing development and maintenance of our UK roads as electric vehicles become more popular.
- EVs registered on or after 1st April 2025 will pay a first year rate of £10, and then the standard annual rate from the second year onwards.
- EVs registered between 1st March 2001, and 31st March 2025 will move into Band B which means they’ll pay £20 a year.
- The expensive car supplement will also apply to electric cars priced over £40,000.
Hybrid cars will also see an increase in VED. Cars with CO2 emissions between 1-50g/km will see an increase in VED from £10 to £110. Cars with emissions between 51-75g/km will increase from £30 to £130.
Any cars that emit more than 75g/km of CO2 will also see big jumps in their first-year tax rates.