2021 VED car tax rates

  • VED rates to stay stable until 2022 says Autumn Budget 2021
  • Diesels now cost more to tax than petrol-engined cars
  • Zero-emission cars costing less than £40k remain exempt

What are the latest road tax rates?

All first-year VED car tax bands have been frozen until 2022. As with the revised Vehicle Excise Duty (VED) system introduced in April 2017, these changes only affect the first year’s tax, which is based on CO2 emissions.

Owners of most cars will continue to pay an unaltered flat rate of £140 from year two onwards. Only zero-emission cars costing less than £40,000 remain exempt from VED car tax charges.

VED car tax freezes until 2022

With the Treasury citing the necessity of inflation-linked rises for first-year VED tax bands for new cars, nobody registering a petrol- or diesel-engined car from April 2018 will escape the increased costs.

However, while those cost increases are modest for petrol cars, buyers of new diesels will have to fork out significantly more.

A full breakdown of the first year VED car tax rates is shown below.

Year one VED rates for cars registered on or after 1 April 2017

This payment covers your car for 12 months. 

CO2 emissions (g/km) Diesel cars (TC49) that meet the RDE2 standard and petrol cars (TC48) All other diesel cars (TC49) Alternative fuel cars (TC59)
0 £0 £0 £0
1-50 £10 £25 £0
51-75 £25 £115 £15
76-90 £115 £125 £105
91-100 £140 £160 £130
101-110 £160 £180 £150
111-130 £180 £220 £170
131-150 £220 £555 £210
151-170 £555 £895 £545
171-190 £895 £1,345 £885
191-225 £1,345 £1,910 £1,335
226-255 £1,910 £2,245 £1,900
Over 255 £2,245 £2,245 £2,235

Rates for second year onwards

Alternative fuel vehicles include hybrids, bioethanol and liquid petroleum gas.

Fuel type Single 12 month payment Single 12 month payment by Direct Debit Total of 12 monthly payments by Direct Debit Single 6 month payment Single 6 month payment by Direct Debit
Petrol or diesel £155 £155 £162.75 £85.25 £81.38
Electric £0 N/A N/A £0 N/A
Alternative £145 £145 £152.25 £79.75 £76.13

Rates for cars with a list price of more than £40,000

You will have to pay an extra £335 per year if the list price of your new car is more than £40,000; you only have to pay this rate for five years from the second time the vehicle is taxed.

Fuel type Single 12 month payment Single 12 month payment by Direct Debit Total of 12 monthly payments by Direct Debit Single 6 month payment Single 6 month payment by Direct Debit
Petrol or diesel £490 £490 £514.50 £269.50 £257.25
Alternative £480 £480 £504 £264 £231

For more information on tax rates, visit the gov.uk website.

New cars’ environmental credentials are also made clear on updated versions of the government’s labelling system.

2018 VED car tax label

Will new car buyers notice much of a difference?

Given that around three-quarters of all new car purchases are made using some kind of finance agreement, such as a PCP, where the first year’s VED tariff is incorporated into the monthly cost, it might well be that buyers of low-polluting diesels won’t notice much of an increase.

However, on models such as the Evoque, where the increase would represent an extra £10-per month on a three-year finance contract, if a customer isn’t persuaded to turn to petrol, it might make them reconsider the optional extras they had intended to include.

Do any diesels escape the 2019 VED car tax increase?

Yes, there is some good news: if a diesel car meets the forthcoming Real Driving Emissions Stage 2 (RDE2) levels set to come into force in January 2021, it is exempt from the VED surcharge and will cost the same as a petrol model.

But all isn’t rosy: at the time of writing, no car manufacturer offers a diesel-engined car that complies with RED2, so that’s a bit of a red herring for the time being.

Cars costing more than £40,000 still attract additional VED car tax

As a form of ‘fair contribution’ to the VED system, buyers of more expensive cars continue to be hit with an additional £310 car tax surcharge on top of the standard rate between years two and six. This applies to vehicles costing over £40,000 new regardless of their CO2 emissions.

This means a zero-emission electric Tesla Model S costs an extra £310 annually between years two and six, totalling £1,550.

Any similarly priced car producing 1g/km of CO2 or more will cost an additional £2,250 over the same period of time, so there is still a saving to be had for going electric.

Classic car tax exemption

Vehicles built 40 years before 1 January of each calendar year will automatically be exempt from paying VED car tax.

That means that as of 1 April 2017, any car built before 31 December 1977, won’t need to pay any tax. Note that this isn’t an automatic process and the exemption needs to be applied for.

To renew your car tax online click here

Picture credit: Getty