Navigating Car Tax: A Beginner’s Guide

What Is Car Tax?

Car tax is a yearly fee that most people have to pay in order to drive on UK roads. You can think of car tax as a toll booth payment- you need to make it to use the road, and car tax is the same process. You can make a car tax payment online or in person, but refusing to pay and then being caught can land you in plenty of trouble. You can face penalties and fines, so it’s best to pay your car tax on time!

How Is Car Tax Calculated?

There are lots of factors that go into how much car tax you pay. There’s three main factors that go into working out car tax:

• How old your car is.
• The emissions that your car produces (how bad it is for the environment).
• What type of fuel your car uses.

There are some long-standing tax bands rules in place too👇

• Cars Registered Before March 1, 2001: Tax is based on engine size, with two rates depending on whether it’s under or over 1549cc.
• Cars Registered Between March 1, 2001, and March 31, 2017: The tax rate is based on fuel type and CO2 emissions.
• Cars Registered After April 1, 2017: In the first year, the tax is based on fuel type and CO2 emissions. After this, it’s based solely on fuel type.

All these different factors come together to place your car into a certain tax band, which in turn will decide how much tax you pay. Let’s take a look at the different car tax bands and how they work.

The Different Car Tax Bands

Car tax banding makes sure you don’t pay more tax than you should. This is seen as the fairest way to work out how much your fork out on tax.

Cars Registered Before March 2001

These cars are classed as private/light goods vehicles. As part of this category, there are two major bands.

Cars Registered After March 2001 And Before April 2017

This band covers most cars currently on the road, and how tax is worked out for these vehicles is slightly different to their pre-2001 counterparts. This bracket ranks based on CO2 emissions, and the lower the emissions the lower the car tax. The idea behind this as to get more people into electric vehicles.

Cars Registered After 2017

For newer cars, another different system is used. In your first year, the amount of car tax will depend on CO2 emissions. From the second year onwards, a standard rate is applied (£190). If you have a new car at a list price of £40,000 or above, you’ll have to pay £410 extra for the first five years that the standard rate is applied.

For more information on how car tax bands work, as well as how you can work out which tax band your car is in, visit our dedicated car tax band blog here.

When Is My Car Tax Due?

The time you pay your car tax is different for everyone, which is why it’s really important to know when your car tax is due. Thankfully this is super easy and can be done online. GOV.UK provide a free online check. All you have to do is provide your car reg, click yes or no to confirm if it is your car and then see your car tax details. The DVLA also provide a free vehicle tax reminder service, which you can have a look into by contacting the DVLA.

Take a closer look at how to find out when your car tax is due via our blog ‘when is my car tax due?’

How To Pay Your Car Tax

You can pay your car tax online or in person. If you want to pay online, simply visit GOV.UK’s tax form. To pay your car tax, you’ll need a reference number that can be found in any of the following places:

• A vehicle tax reminder letter.
• Your car log book (V5C).
• New keeper slip if you have just bought the car.

If you don’t have any of these, you’ll need a new car logbook. If you have financed your car, get in touch with your finance company for the logbook. Once you have this, work through the application form to pay your tax.

If you prefer an in person experience, find a post office that takes tax payments. You will need your reference number and possibly proof of a successful MOT.

Does Everyone Have To Pay Car Tax?

Believe it or not, some drivers on our roads don’t have to pay car tax. Currently, the cars that are exempt from paying car tax are:

• Disability vehicles. This includes mobility scooters and powered wheelchairs.
• Classic cars. Vehicles that are 40 years old or more.
• SORN vehicles. A statutory off-road notice can be requested if your car is no longer going to be driving on roads. With this notice, you won’t have to pay car tax.
• Agricultural vehicles. These don’t have to be taxed if they are used on private land.

We want to make a special mention for electric cars which in the past have not had to pay car tax. This is set to change however, with plenty of new car tax rules coming in 2025. We’ve covered this in a separate piece, ‘car tax changes in 2025’.

What Do I Do About Car Tax When I Sell My Car?

Selling your car and not sure what to do about car tax? Don’t worry, it’s super easy and stress free. If your car tax hasn’t ran out yet but you switch cars, you can get money back for any full months of tax you haven't used. Car tax isn't like a gym membership you can pass on to someone else, so you need to let the DVLA (basically the car people in the UK) know you sold the car. Once they know, they'll automatically send you a refund for those unused months.

Declaring Your Car SORN

Has your car built up some sentimental value and you just can’t sell it? This is totally fine, but if you are not planning to drive it on roads, declare it as SORN to avoid paying tax on it. SORN (statutory off-road notice) is a way of telling the DVLA that your car is not being used on roads. This in turn means you don’t have to pay car tax on it. This is ideal if you’re a car collector who has plenty of old motors stored up, as you shouldn’t be paying for something that you aren’t using. To apply for a SORN, visit the GOV.UK SORN page where you will be prompted to enter information to declare your car off road. In order to start the process though, you must have either of:

• The 11-digit number in your vehicle log book (V5C).
• The 16-digit number on your vehicle tax reminder.

Once you have one of these, you’re good to go.

If you’d rather complete this process away from your computer, you have two other options.

• Apply by phone. Contact the DVLA on 0300 123 4321 and ask for the required service.
• Apply by post. You can send an application form to the DVLA in Swansea, SA99 1AR.

Car Tax Changes In 2025

As we approach 2025 there are some changes occurring to car tax. This was confirmed in the Autumn budget by Rachel Reeves and will impact drivers up and down the UK. So what are the changes?

First of all, electric cars will now be taxed the same as petrol and diesel cars. Previously electric vehicles paid either very little or no tax at all, in an attempt to get more people driving eco-friendly motors. This is now set to change, with electric cars paying £190 per year, with £40,000 plus EVs paying an extra £410. As for petrol and diesel cars, it’s unclear how much tax will be paid yet, and it’s a case of waiting until the government release the new car tax rates. To find out more about car tax changes in 2025, as well as how you can check what your car tax is, visit our blog titled ‘car tax changes in 2025’.

Conclusion

That’s all things car tax covered. From what it is to how it’s paid, through to potential changes in 2025, we’ve got you covered when it comes to your car tax.

That’s not all we can help with though. We offer competitive finance rates for customers of varying credit scores, with a quick decision and easy application process. Get a free car finance quote today.