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New Car Tax Bands Explained

By raccars Published

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With the death of the paper tax disc imminent and a bunch of new rules surrounding how cars are taxed in the UK, now seems a good time to review the increasingly complicated process.

VED in the UK used to be a simple, flat rate affair, however concerns about CO2 emissions and the environmental impact of our reliance upon car travel changed the concept of car tax to a kind of value judgement system. Nonetheless, every car owner is obliged to pay road tax or apply for a SORN - 'Statutory Off Road Notification'.

These days the level of VED you pay will depend upon the size of your engine for those cars whose first registration was pre-1 March 2001 - a lower rate applies for cars with an engine capacity below 1,549cc - or upon the kind of fuel and level of CO2 emitted by cars first registered after that date.

Cars first registered after 1 March 2001 are categorised into tax bands according to their CO2 emissions in g/km - the number of grams of CO2 leaving the exhaust for every kilometre driven. In effect, the lower your CO2 emissions, the less tax is due on the car, which is one of the main reasons why cleaner, greener cars are becoming more and more popular.

However, it gets more complicated, with the tax payable divided into two parts. The main rate and a separate rate that applies to the first year of ownership of a new car. This first year rate can vary wildly from the standard rate. Some cars get their first year rate for free but are penalised with a higher rate than usual the next year, according to the level of CO2 emissions. Separate rates of tax apply to commercial vehicles, alternative fuel vehicle and motorbikes.

To be able to calculate the amount of tax you need to pay, you need to know your car's average CO2 emissions. For example, cars with emissions below 100g/km, or tax band A, are completely tax exempt, for the first year and following years. Cars with emissions between 101-110g/km in CO2 fall into tax band B and are charged nothing for the first year followed by an annual rate of £20. Bands go up by increments of 10g/km, with the first year free up to band E or 131-140g/km, when owners have to pay £130 in VED the first year and the same amount annually thereafter.

The highest band is M for cars emitting over 255g/km, for which owners are obliged to pay £1,090 in VED the first year and £500 annually thereafter.

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