In the Spring Budget 2023, it was announced that Vehicle Excise Duty (VED) otherwise known as road tax, car tax or road fund licence, is increasing… again. The increase in VED is to reflect inflation.
so How much will it cost to tax my car?
How much you will pay to tax your car depends on when it was first registered. With the exception of inflationary increases changes to the VED system are not applied retrospectively. This means that if you are buying a new car today you will pay VED based on the current tax band system that was introduced on April 1st 2017. If you are buying a used car that was registered before April 1st 2017 then you will pay a rate based of the old VED system.
The tax system is split into two main rates;
- The first tax rate applies to the new car’s first year on the road and varies depending on how much carbon dioxide it emits.
- After the car is a year old it is taxed on a second system that is determined by how much the car cost when it was new.
Both the first and second-year onward tax rates are affected by what powers the car – electricity, conventional fuel, or a combination of the two.
The first-year road tax is included in a car’s on-the-road (OTR) price and is based on its carbon dioxide emissions. This ranges from £0 for zero-emission cars to £2,605 for cars that emit 255g/km or more.
For cars registered on or after April 1st 2017
There is a £10 annual discount for alternatively fuelled vehicles (hybrids, mild hybrids and plug-in hybrids) so their owners pay £170 a year.
For cars registered on or after March 1st 2001
Cars that cost £40,000 or more (after options) are subject to a further £390 (up from £355 in 2021/2022) that runs for five years. This comes into effect after the first year so you pay this supplement from years two to six of the cars life.
This means that you’ll pay £570 a year for five years if your car is over £40,000 (£560 for alternatively fuelled vehicles).
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