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How to Figure out Your Road Tax Obligation

The UK government earns a significant amount of money from the humble motorist. Each driver will contribute towards the tax pot whenever they fill up their vehicle, but they also need to shell out for the privilege of being on the road. If you're on the lookout for a new car, you will want to figure out its road tax liability, but this varies considerably based on many factors. As it can be a little difficult to understand on the face of it, what do you need to know about road tax calculations and how they may affect your purchasing budget?

Tax Obligation

If you are the vehicle's registered keeper, you will need to pay road tax to the government annually. Regulators have set different rates for each car based on various factors such as:

  • emissions,
  • type of fuel (petrol or diesel),
  • size of the engine,
  • date of registration.

Changing Rules

A separate set of rules apply when the car first rolls out of the showroom. The vehicle excise duty is then due as part of your settlement with the dealer, and it is typically bundled into the cost so you won't have to worry about dipping into your pocket, per se.

New rules are brought in regularly by the politicians, and the latest set of changes came around in April 2020. This shift was quite significant and aligned the tax base with a new set of emissions rules - the "worldwide harmonised light vehicle test protocol (WLTP)." Many people found that these rules reclassified their vehicle, and it entered a higher emissions group, which may have made their annual tax payment more expensive.

Current Position

These days, when the car is brand-new, it'll be taxed according to its carbon dioxide emissions. Diesel-engined vehicle owners generally have to pay a bit more unless it conforms with a separate set of rules known as Real Driving Emissions (RDE2). Car manufacturers are required to test each vehicle while it is in the process of development to determine real-life emissions. As in the case of the WLTP, the RDE2 results will determine the eventual tax burden for the new owner.

From early 2021, all new diesel-engined cars have to conform with RDE2. This standard should bring the tax liability in line with petrol-engined vehicles of a similar size.

As you can imagine, you will pay more tax as the emissions grow. The scale grows all the way up to 255 g per kilometre of CO2, and if you are unlucky to have such an inefficient vehicle, you will undoubtedly pay a lot of vehicle excise duty for the privilege.

The method of taxing cars changed significantly in 2017. If you have bought a car since that time, you will, as previously mentioned, pay an initial sum of money to the Exchequer as you take the keys. You will then be responsible for paying an annual sum of £150 for petrol or diesel vehicles and £140 for alternatives. If you buy an electric car, you will not have to pay any tax as it will not emit any CO2.

You also have to pay a luxury tax if the vehicle has a list price of more than £40,000. From years two to six, you will have to find an additional £225, but will then go back to the standard rate of £150 per year after that.

Older Vehicles

If you are buying a used car that dates between 2001 and 2017, a different taxing system will apply. Again, you will tax your vehicle according to its CO2 emissions, but there are 13 individual bands. You can check to see how much you will owe before you buy, by looking at the tax table.

If the vehicle is even older and dates back before 2001, a flat rate applies. If it has an engine of up to 1549 cc, the rate will be £165 per year and £270 if larger.

Accessing Data

If you know the vehicle's registration number, you can enter it here and access a lot of information. You can find out if it has a current tax status, and active MOT, or whether the previous owner has told the government that it is permanently off the road. This section is known as a SORN (statutory off-road notification), and if it is active, no tax is due.

Checking and Paying Your Tax

The government maintains a web page where you can do a road tax check to determine how much tax is due. You can access the information here.

You can pay your tax bill once per year or in two separate payments, or take advantage of a monthly payment programme via direct debit. You will need to add a small premium for any payment schemes.

When it comes to road tax, online payment is a lot easier. You can set up a direct debit program or use a debit or credit card. You will need reference information which you can find on the vehicle logbook or a reminder letter received from the DVLA. If you buy from a dealer, they will typically help you take care of this, but if not, you will need to get the slip out of the logbook for information.

How Much Does the Government Make?

While the amount raised through vehicle excise duty is much smaller than the money gathered through a fuel tax, it still accounts for more than £6 billion per year. It is hardly surprising when you consider that there are more than 40 million vehicles on the road across the United Kingdom and the number is growing steadily.

Paying No Tax

There are very few ways to avoid the obligation when it comes to paying road tax. Of course, when you consider that they primarily base the tax on emissions, electric cars may be the way to go. Other than that, you will have to register the vehicle as being off the road. Alternatively, you can apply for relief if the car is modified to carry disabled passengers.

In Closing

Politicians are quite serious when it comes to reducing vehicle emissions and protecting the environment. You can expect road tax rates to keep going up as part of this push and as the country moves ever closer to an all-electric future.