Vehicle Excise Duty (VED) or car tax is a legal requirement for most cars on our roads. It can be calculated based on a number of factors, from the car's engine size to its year of registration and CO2 emissions.
As the tax system has undergone some changes in the past few years, we thought we'd put together this quick guide explaining exactly how car tax works.
Contrary to popular belief, car tax doesn't directly fund the upkeep of public roads in the UK. It's actually paid into what's known as the Consolidated Fund, which is the government's general pot of money. Road maintenance does come from this pot so, technically, car tax does help keep our road network in check.
Generally speaking, though, road tax is paid by drivers so they can use, or park, their cars on public roads. Drivers need to have car insurance in place and, in most cases, a valid MOT certificate unless the car is exempt because of its age.
Car tax bands are a little complicated, especially due to changes introduced from April 2018. The tax you pay will be based on when the car was registered – you can find tax rates tables and a vehicle tax rate calculator on the Gov.UK website. In summary:
As Which? explains, the Autumn Budget 2018/19 revealed that tax rates for cars, vans and motorbikes will increase in line with the Retail Price Index from 1 April 2019.
Money Advice Service notes that some drivers will be exempt from paying car tax, including:
If you have a disability, you may not have to pay car tax if:
Electric cars and certain vehicles used for agricultural purposes do not need to be taxed, either – find more information here.
You can tax your car online through the Gov.uk website. You can pay using a debit or credit card, or through Direct Debit and will need a reference number from:
Even if you're exempt from paying tax, you still need to apply for it.
If you've opted to pay for your tax through Direct Debit, it'll renew automatically when it's due to expire. You'll receive an email or letter telling you when the payments will be taken out of your account.
Car tax cannot be transferred between cars. So, if you're buying a used car, this means you have to sort out tax before you can drive it, as well as car insurance.
On the other hand, if you're the one selling a car, you're able to claim a refund for any full months remaining on your car tax. You'll receive this automatically once you've returned the selling or transferring or a vehicle part of the log book to the DVLA. Learn more on how to cancel car tax.
No, you need a valid MOT and car insurance to tax your car and drive or park it on public roads. Driving without tax is a punishable offence, but more serious is getting caught driving a car that's declared SORN
Choosing a car that's cheap to tax could save you hundreds – if not thousands – of pounds during the time you own it. Buy a Car has listed these 10 affordable models to tax (future diesel tax changes could impact these prices):
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