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What is car tax?

Vehicle Excise Duty (VED) — often called 'car tax' or 'road tax' — is an annual tax drivers have to pay to use and keep their cars on the UK's public roads. Tax applies to almost all vehicles, including vans, lorries, scooters and motorbikes.

How much does car tax cost?

The cost of car tax ranges from zero to £1,000 and more each year. Generally speaking, the bigger your car's engine the more you'll pay for tax, not to mention insurance.

Cars registered before 1 March 2001 are taxed according to their engine size, while the tax on cars registered after that date's calculated on fuel type and CO² emissions. To find out how much you'll need to pay, take a look at the government's vehicle tax rate tables.

New VED bands will come into effect as of April 2017, changing the way new cars are taxed. First year rates for new cars will change based on their CO² emissions: a flat standard rate of £140 will apply to all cars apart from those emitting zero grams of CO², for which there will be a standard rate of £0. Also, cars with a price tag of over £40,000 will be charged a £310 supplement for the first five years in which a standard rate's paid.

Which vehicles are tax exempt?

Some vehicles don't require tax, such as electric cars, historic cars manufactured before 1976, and vehicles used solely for agricultural, horticultural or forestry purposes. You might not have to pay tax due to your personal circumstances either, for instance if you have a disability. The complete list of vehicles exempt from tax can be found on the government's website.

Any car that's being kept exclusively on private land does not need to be taxed, though the vehicle's registered keeper must complete a Statutory Off Road Notification (SORN) to inform the DVLA that it won't be used on public roads. For more information, see our guide to declaring a SORN.

What happens to car tax when you buy or sell car?

The paper tax disc was scrapped back in October 2014 and replaced with a new, more streamlined digital database. Not only has moving online saved the DLVA hundreds of thousands of pounds in administrative costs each year, but it's also allowed the body to better monitor who has and hasn't paid their road tax.

The new law also affects the buying and selling of cars, in that tax can no longer be transferred with the vehicle. So, whereas a car could have been sold with a number of months' tax remaining on it, now the buyer has to arrange tax themselves straight after the purchase. The seller's able to claim a refund of remaining tax through the DVLA website, or will receive an automatic payment once they notify the DVLA the car's been sold or transferred.

If you're caught driving a car that's untaxed or wrongly taxed, you could face a fine of up to £1,000. You might receive a discount for paying early, but you might be ordered to pay back all duty owed since the car was last taxed.

Paying for car tax

To be able to tax your car, you'll need to prove you have valid insurance and if it's more than three years old, that it's passed its MOT.

The simplest way to pay for your tax is online via the tax your vehicle page, using the reminder letter (V11). If you haven't received a letter, you can use a V5C registration certificate (log book) that's in your name, a new keeper supplement if you've just bought the car (VC5/2), or a last chance letter.

You can also tax your vehicle by popping into your local Post Office — be sure to check that it's a vehicle-licencing branch first. Along with payment, you'll need to either take your reminder letter, log book or new keeper supplement. If applicable, you might also need to present your MOT certificate or valid reduced pollution certificate.

You can also pay for car tax by calling 0300 123 4321.

Direct debit

Since October 2014 drivers can now pay for their tax via Direct Debit on a monthly, 6 monthly or yearly basis. Your tax will renew automatically each year; this means payment will be taken automatically unless you actively cancel it, make a SORN, or your MOT's expired.

Direct debit payments will be taken from your account on the first working day of each month, apart from the initial payment. You can set this up online or at a Post Office that deals with tax, and you'll need to give your address and date of birth, along with details of the bank account you wish the payments to be taken from.

Checking your vehicle's taxed

For added peace of mind, you can check your vehicle's taxed correctly using the government's vehicle enquiry service.

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