Road tax and rates for second hand cars

Road tax and rates for second hand cars

Road tax is a tax that every owner of a personal vehicle or car has to pay to the UK Government, depending on the carbon emission level their car has. It varies from car to car and each one comes under a tax band that the owner has to follow. Recently, the Government has decided to use the entire money generated from road tax in the improvement of roads, which went to treasury earlier. Here we will know more about the recent changes made in the road tax rules. If you are no longer using your car then you have to apply for SORN for which you need to contact the DVLA.

Road tax in UK

In the UK, for every car sold, the Road tax or Vehicle Excise Duty (VED) is an essential requirement, however, in some cars it does not cost anything. If your car is very expensive or is a very polluting car then you are expected to pay more taxes. But, since April 1, 2017 the system got its biggest disruption for more than 16 years and it meant some cars today costs more while buying after this date. Several cars got affected by the 2017 tax change. As you progress through the article, you will get to know how specific models with different CO2 emission level will incur no cost or extra costs as a result of the new tax system.

Also Read: Vehicle Tax

In the 2017 autumn budget, UK Chancellor Philip Hammond announced, Diesel cars that will not meet the standards set by the new Real Driving Emissions Step 2 (RDE2) legislation in 2018 will be liable to higher road taxes. The standards set in the RDE2 are stricter than the Euro 5 standards. Following which even the newest cars are costlier which also apply to company cars.

If you have bought a new car and you are the first registered holder of the car, then you will be paying a different first year tax rate and from second year onwards you will be paying regulated rates.

For cars registered after 1 April 2017, you will find the first year road tax bands here:

Road tax bands and prices for first year for cars registered after April 1st, 2017

CO2 emissions (g/km) Petrol and diesel cars Alternative fuel cars
0 £0 £0
1-50 £10 £0
51-75 £25 £15
76-90 £100 £90
91-100 £120 £110
101-110 £140 £130
111-130 £160 £150
131-150 £200 £190
151-170 £500 £490
171-190 £800 £790
191-225 £1,200 £1,190
226-255 £1,700 £1,690
More than 255 £2,000 £1,990

The table shared above applies only to the cars ownerships of first year. From the second year onwards, every car either has to pay a standard rate or an upper rate based on the cost of the car and fuel type it runs on. You can also apply for a car tax refund for which certain parameters have to be checked.

Following table shows the second year onwards road tax bands:

Road tax bands for second year onwards for cars registered after April 1st, 2017

Fuel type Cars costing less than £40,000 Cars costing more than £40,000
Petrol and diesel cars £140 £450
Alternative fuel carxe3 £130 £440
Electric car £0 £310

Cars registered before April 1st, 2017 and their road tax bands

Also Read: Company Car Tax Table & Mileage Allowance Rates for 2018/19 & 2019/20

The second year rates apply on the cars that can no longer be bought pre April 2017 cars brand new.

No longer can you buy pre-April 2017 cars brand new. Therefore, only the second-year rates apply. See the table below for more information. The table shows comparison of the old first-year road tax bands for vehicles registered before 1st April 2017:

Road tax bands for first year for cars registered before April 1st, 2017.

CO2 emissions Petrol and diesel cars Alternative fuel cars
A – up to 100 £0 £0
B – 101-110 £0 £0
C – 111-120 £0 £0
D – 121-130 £0 £0
E – 131-140 £130 £120
F – 141-150 £145 £135
G – 151-165 £185 £175
H – 166-175 £300 £290
I – 176-185 £355 £345
J – 186-200 £500 £490
K – 201-225 £650 £640
L – 226-255 £885 £875
M – more than 255 £1,120 £1,110

Here you will find the road tax bands that you will have to pay if you buy a car registered before 1 April 2017:

Road tax bands second year onwards for cars registered before April 1st, 2017

CO2 emissions Petrol and diesel cars Alternative fuel cars
A – up to 100 £0 £0
B – 101-110 £20 £10
C – 111-120 £30 £20
D – 121-130 £110 £100
E – 131-140 £130 £120
F – 141-150 £145 £135
G – 151-165 £185 £175
H – 166-175 £210 £200
I – 176-185 £230 £220
J – 186-200 £270 £260
K – 201-225 £295 £285
L – 226-255 £500 £490
M – more than 255 £515 £505

The reason for change in road tax

When the road tax system was conceived, it was associated to CO2 emissions of vehicles/cars. Since cheaper cars emitted less pollutant than the premium segment cars, the small and cheaper cars paid a comparatively lesser road tax than the big and costlier cars that were emitting more CO2 and other pollutants.

The implemented system started facing problem when it started showing normal cars with improved engine and vehicle designs were emitting so less CO2 that they fell into the tax-free band. Only electric cars, the ones with hybrid engines and cars with low-emission were put in the lowest band but with the improvement in technology, more normal conventional cars ended up paying no tax.

It continued the cashflow due to more cars falling into the new tax free band. The government as its plan was, introduced new tax rules to include more vehicles and cars into taxation bracket. And reserving the tax free status only for selected few zero-emission cars.

The 2017 road tax changes

Similar to what was followed earlier, owners have to pay tax rates for the first year that is associated to CO2 release of the car. From second year onwards the owners have to follow the standard rate for every year, which is £140 per year. However, for the car models that would cost more than £40,000 (after options) will invite an extra cost of £310. This will make most premium segment cars pay £450 as a whole every year as a tax.

Electric cars or any zero emission cars will not invite either the standard rate tax or first year tax, however, different from previous year, this do not apply to plug-in hybrid models that even today uses conventional combustion engine. Even then, for the first 5 years of ownership, zero-emission cars and vehicles that cost more than £40,000 (example- - Tesla Model S) will invite additional cost of £310, prior to going back to the tax-free band.

As it was before, tax can not be transferred between owners. That is if one sells his car, the new car owner have to tax it and the pending tax on the vehicle can be claimed from the government. Also, the £10 reduction in tax rates for alternative fuel vehicles is not changed for the converted vehicles that would run on LPG.

Demonstrated below is the maths for a range of cars to display the changes between the outgoing tax systems to the 2017 system.

Some examples given below to show how changes will affect you:

  • Nissan Leaf – all-electric

    This fully electric Nissan Leaf has no CO2 emissions and costs less than £40,000. Means it is tax free under the present rules also under the proposed 2017 tax bands.

  • Tesla Model S

    The luxurious all-electric car, Tesla Model S is currently tax free. In 2017, which was its first year, it was again tax free because it has no CO2 emissions. But later on it will be charged £310 per year because the cost of the cars is more than £40,000. Under the 2017 tax band system not all electric cars will be tax free.

  • Volkswagen Golf – 2.0-litre diesel, 148hp, 109g/km CO2

    The 2.0 TDI Golf Match would cost nothing for the first year, and then £20 per year tax was charged. Under the 2017 system it will be charged £140 per year.

Is it a Bad News or Good News?

Although the changes in the rules will increase the cost of maximum cars, there are a few positive sides to it. If you purchase high end cars with luxurious features and powerful engine that pollutes too much but are comparatively cheaper than many cars, you taxable amount will be much lesser after April 1st as cost of both the models is less than £40,000.

The UK government has made it mandatory that the tax amount that comes from road taxes pay will be used for the roads people use. Before this new tax rule was implemented properly, the taxes directly went to the treasury and improvements whenever needed for roads were or many a times even were not paid for from there. The new rule will enable the money paid in road tax to directly go towards the improvements of roads.

What changes were made in April 2017 tax rules?

According to the old VED tax system, before April 2017, a good number of new cars were paying relatively lesser amount of tax and several small diesel cars with higher CO2 emissions were running absolutely tax free. It was George Osborne, the Ex-Chancellor of the Exchequer, who realised the possibilities of earning millions of pounds by bringing some changes in the road tax rules and thus a new system was implemented, which increased the cost of riding cars for a lot of vehicle and car owners.

UK road tax bands.

UK road tax bands

The current rates are applicable on most new cars, in which they will have a significant increase in their first year tax rate demands and after that fixed rate of £140 will apply every year. But if one is buying a car with alternative fuel option (hybrid cars that runs on LPG or bioethanol), they have to pay £10 less in their first year of tax and from next year onwards £130 per year. However, if your car was registered before 1st April 2017, the new rule will not apply.

The table below will help you understand what car tax band is your car in?

VED tax bands of cars/vehicles from April 2017 onwards:

VED car tax bands for cars that are first registered after April 1st, 2017 onwards.

Emissions (g/km of CO2) First year petrol/diesel rate Standard petrol/diesel rate First year alternative fuel rate Standard alternative fuel rate
0 £0 £0 £0 £0
1-50 £10 £140 £0 £130
51-75 £25 £15
76-90 £100 £90
91-100 £120 £110
101-110 £140 £130
111-130 £160 £150
131-150 £200 £190
151-170 £500 £490
171-190 £800 £790
191-225 £1,200 £1,190
226-255 £1,700 £1,690
Over 255 £2,000 £1,990

NOTE: £310 annual supplement has to be paid for continuously five years from the second year of registration every year for cars that costs more than £40,000.

Old (pre-April 2017) vehicle VED tax bands: table

VED Band CO2 Emissions Annual rate First year rate
A Up to 100 g/km £0 £0
B 101-110 g/km £20 £0
C 111-120 g/km £30 £0
D 121-130 g/km £110 £0
E 131-140 g/km £130 £130
F 141-150 g/km £145 £145
G 151-165 g/km £185 £185
H 166-175 g/km £210 £300
I 176-185 g/km £230 £355
J 186-200 g/km £270 £500
K* 201-225 g/km £295 £650
L 226-255 g/km £500 £885
M Over 255 g/km £515 £1,120

What happens when you sell your car?

Any road tax remaining from the previous owner of the car will not transfer to the new owner with the vehicle under the new car tax rules. However, the seller can claim for road tax refunds on any remaining tax on the vehicle. But buyer will have to pay taxes to re-tax the car.

You can find whether or not your car is taxed online via the Government website. You will need the model and make of your vehicle along with its registration number to know the details.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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