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New Car Tax Rules Explained

New Car Tax Rules Explained

The government made some changes to road tax rules as of April 2021. We understand it can be hard to keep track of what’s what, so we’ve put together a handy guide to explain the current rates.

Read on for more.

What are the new road tax changes?

Cars that were registered as new, on or after 1st April 2017:

- The rate for the first year is based on the amount of CO2 produced by the car

- After year one, a standard rate applies. Petrol and diesel car owners will pay £155 a year; and owners of alternative fuelled cars (e.g., hybrid, mild hybrid, and plug-in hybrid vehicles) will pay £145

- Rates are higher for any diesel cars that do not meet the Real Driving Emissions Act (RDE2)

- Owners of cars that cost more than £40,000 (list price) will have to pay an additional £335 a year on top of the standard rate, for five years (£1,675 in total) - unless your car is an electric vehicle, as EVs are exempt from this charge

- Owners of electric cars will have no road tax to pay (even those registered as new before April 2017)

Cars that were registered as new, between 1st March 2001 and 31st March 2017:

- Tax will remain at the previous rates, which have been calculated based on fuel type and official CO2 emissions. You can find a vehicle’s CO2 emission details on the V5C registration certificate, or on the government website

Cars registered before 1st March 2001:

- The car tax rate is charged based on vehicle engine size. As of April 2021, those with engines smaller or equal to 1549cc will pay £170 a year, and those with larger engines will pay £280 a year

What do the changes mean for motorists?

If you're buying a new car, you will pay road tax based on the rules which have been most recently updated in April 2021.

If you’re purchasing a used car that was first registered before April 2017, then you will pay the rate based on the system which applied at the time of registration.

Additionally, introducing the option to pay for car tax monthly rather than annually can help spread the cost over time, however, motorists who choose this method will incur a surcharge. Figures listed in this article are based on the amount being paid in a single payment. 

What happens to road tax when selling a car?

Under the new road tax system, any remaining road tax which you have when you sell your car, will not be transferred over with the vehicle.

The seller of the vehicle can apply for a road tax refund for any remaining tax, and the buyer of the vehicle will be responsible for re-taxing the car.

Once the DVLA has been alerted that the vehicle has been sold, the tax refund will be processed.

If you have any further questions about vehicle road tax, you can check the full government guidelines or contact your local dealership, where a member of our friendly team will be able to advise.