Car tax explained

Three systems, and your registration date picks one

There is no single car tax rate, and comparing two cars by their tax bills usually means comparing two different sets of rules. The split is by date of first registration, which you will find on the V5C. A car registered on or after 1 April 2017 is in the current system. A car registered between 1 March 2001 and 31 March 2017 is in the CO2 lettered band system. Anything registered before 1 March 2001 is taxed on engine size in the private and light goods class.

A car never moves between systems. A 2016 diesel stays in the lettered bands for as long as it exists, which is why an old car with low emissions can still be cheaper to tax than a new one with the same figure. Rates within each system change most years at the Budget, but the system a car belongs to does not.

The rate is also set by the licence rather than by the calendar year, so a car taxed in March pays the old year's rate for the whole twelve months. That is worth a moment's thought if a rise has been announced and your renewal falls close to the start of April.

• Registered on or after 1 April 2017: first year rate on CO2, then a flat standard rate.
• Registered 1 March 2001 to 31 March 2017: a rate set by CO2 band letter A to M.
• Registered before 1 March 2001: two engine size bands, split at 1549cc.

The first year rate is paid once

In the current system the CO2 figure only decides the cost of the first twelve months. It is charged when the car is first registered, it is almost always paid by the dealer and rolled into the on the road price, and it never appears again. That is why a first year rate matters most to a new car buyer and hardly at all to somebody buying the same car at three years old.

The scale is steep. A zero emission car pays £10 for its first year. A car emitting between 1 and 50 g/km pays £115, and one between 51 and 75 g/km pays £135. By 131 to 150 g/km, which covers a great many ordinary petrol family cars, the first year rate is £560. The bands keep climbing above that into the thousands, so the first year rate on a large performance car can be a noticeable fraction of a small car's total price.

Diesels have their own quirk. A diesel first registered after 1 April 2018 that was not certified to the second step of the Real Driving Emissions test, known as RDE2, pays the first year rate of the band above its own. A non RDE2 diesel at 51 to 75 g/km pays £280 rather than £135, and one at 131 to 150 g/km pays £1,410 rather than £560. It applies to the first licence only, and only to diesels: no petrol or hybrid is moved up a band.

The standard rate from the second licence

From the second licence onwards every car in the current system pays the same flat standard rate, which is £200 for a single twelve month payment. The CO2 figure stops mattering entirely. A small petrol hatchback and a large petrol estate registered in the same month pay the same £200, and since 1 April 2025 so does an electric car.

That flatness is the single most useful thing to understand about modern car tax. When somebody says a car is cheap to tax, ask which year they mean. If the car is out of its first year and registered after April 2017, the answer is £200 whatever it is, and any difference in running costs is coming from fuel, insurance and servicing rather than from tax.

How you pay changes the total. A single twelve month payment is £200. Twelve monthly instalments by Direct Debit come to £210, because paying monthly or every six months carries a 5% surcharge. A single six month licence is priced above half the annual rate, so two of them in a year cost more than one annual licence. An annual payment by Direct Debit carries no surcharge at all, which makes it the cheapest way to spread nothing.

The expensive car supplement

Cars with a high list price pay an additional rate on top of the standard rate for five years, running from the start of the second licence. The supplement is £440 a year, so a car that qualifies pays £640 a year in total rather than £200, for years two to six of its life. After that it drops back to the standard rate.

The threshold is a list price of more than £40,000 for a petrol, diesel or hybrid car. For zero emission cars the threshold is more than £50,000. The price that counts is the published list price including options, before any discount you negotiated, so a car nudged over the line by metallic paint and a technology pack is caught even though you paid less than the threshold for it.

This is the part second hand buyers miss. The supplement attaches to the car, not to the first owner, so buying a three year old car that cost £44,000 new means inheriting a £640 annual bill for the rest of the five year period. It is worth checking the original list price of any premium car you are looking at, because two otherwise identical cars can differ by £440 a year purely on how they were specified when new.

Cars registered between March 2001 and March 2017

These cars are taxed by a band letter from A to M, and unlike the current system the band applies every year rather than just the first. The letters are set by CO2: band A covers up to 100 g/km at £20, band B 101 to 110 g/km at £20, band C 111 to 120 g/km at £35, band D 121 to 130 g/km at £170 and band E 131 to 140 g/km at £200. The scale rises through band J at £410 for 186 to 200 g/km, band K at £445, band L at £760 for 226 to 255 g/km and band M at £790 for anything over 255 g/km.

Band A used to be free and is not any more, so an owner of an older low emission car who has paid nothing for years now has a bill. Band K holds a legislative oddity worth knowing: it also covers cars emitting more than 225 g/km that were registered before 23 March 2006, because the bands above it did not exist when those cars were new. A big engined car from 2004 can therefore be cheaper to tax than a newer car with the same emissions.

Cars registered before 1 March 2001 skip CO2 altogether. They sit in the private and light goods class and pay on engine size, with one rate up to 1549cc and a higher one above it. There is no first year rate and no expensive car supplement in that class. The current figures for both bands are on the rate tables page on this site and in DVLA's V149 rate card.

Exemptions, and the sale that catches everybody

Some vehicles pay nothing. The list covers vehicles used by a disabled person, disabled passenger vehicles run by organisations, historic vehicles, mobility scooters and powered wheelchairs, mowing machines, steam vehicles and various agricultural vehicles. Electric vehicles were on that list until 1 April 2025 and now only heavy goods vehicles over 3,500kg remain exempt on those grounds. Historic status arrives on a rolling 40 year basis: a vehicle built before 1 January 1986 can stop paying from 1 April 2026.

An exemption is not permission to ignore the tax. GOV.UK is explicit that you must tax your vehicle even if you do not have to pay, so an exempt car still needs a current licence on the record, applied for in the same way as a paid one. A vehicle with no licence at all is untaxed regardless of the rate it would have paid.

The last piece catches thousands of buyers a year. Vehicle tax is not transferred when a vehicle is sold. DVLA cancels the seller's tax as soon as the sale is notified and refunds the full months left, and the buyer must tax the vehicle before driving it. The five minute drive home from the seller's house is exactly the journey people make untaxed. Tax it on your phone using the green new keeper slip before you turn the key.