Road Tax Changes

Everything You Need to Know About the 2021 Vehicle Excise Duty (aka Road Tax) Changes

On the April 1st 2021, Vehicle Excise Duty (widely known as car tax or road tax) changed. And while it’s altered frequently, it’s still best to keep up to speed with the updates in order to know how it will affect you.

Here’s what you need to know about the latest alterations coming into force…

How will VED be calculated?

In April, the first year of VED on a car will be calculated using WLTP (Worldwide Harmonised Light Vehicle Test Procedure) carbon dioxide figures, meaning the cleaner the car, the less you’ll need to pay.

While it used to be determined through the NEDC (New European Driving Cycle) test, which was last updated in 1997, that isn’t the case anymore due to it being generally considered outdated with the rise of advanced technology in the last decade.

Is VED increasing?

In short, yes. This is due to the upcoming WLTP method being able to determine a more realistic evaluation of your vehicle’s official fuel consumption (mpg), driving range of CO2 emissions (g/km), resulting in cars’ CO2 emission output changing and placing vehicles in higher tax bands to its current rate. The standard rate of road tax has risen by 3% year-on-year from £150 to £155 – significantly above the UK's 0.8% inflation rate.

When exactly will it be introduced? 

For Vehicle Excise Duty, the change is planned to be introduced on April 1st 2021, while Benefit-in-Kind on Company Car Tax is set for April 6th 2021. The alteration will only affect your first VED payment when buying and registering a new vehicle after these dates.

Road Tax (VED) for cars registered from 1 April 2020 onwards

The latest changes to the Road Tax (VED) system saw WLTP (Worldwide Harmonised Light Test Procedure) figures considered for the first time. WLTP testing figures are designed to give you (and in this case the government) a true reflection of the CO2 emissions your car will produce when it is driven on the road – rather than under unreliable laboratory conditions.

Along with the new testing, annual tax rates grew slightly (to account for inflation) and electric cars were handed an exemption from the £40,000 premium car tax that applies to petrols and diesels for five years after the car was sold. Aside from these changes, this is essentially the same system that was introduced in 1 April 2017.

What kind of First-Year Rates will I have to pay?

That of course depends on the kind of CO2 your car is emitting. If it’s 0g/km (the grouping reserved for zero-emissions vehicles), then you won’t have to pay anything.

However, on the other side of the spectrum, there’s VED for cars which emit over 255g/km of CO2. Owners of cars in this band will have to fork out £2,000.

Around the middle, there’s VED for cars emitting 111 to 130g/km of CO2 – which will have to pay £160.

Is it possible to beat the VED increase?

To avoid the increase, it’s as simple as buying a new car before April of each year when road tax increases. This could save you quite a bit of money on the first year of VED.

There's still a way to be exempt from road tax altogether though and that is by buying an electric car. These vehicles currently perform their best in town settings and on shorter journeys. If you go on regular long drives of more than 100 miles, we advise checking what kind of charging infrastructure is around so you don't fall short of charge.

While EVs are still a relatively rare on the roads, sales are increasing and all the big manufacturers such as Audi, Volkswagen, Jaguar offer at least one electric model. In the UK, petrols and diesel new car sales are set to be banned in 2030.

How much will my car tax be?

The below rates are for the 2021-2022 tax year

Emissions (g/CO2/km) First year rate Standard rate*
0 £0 £0
1-50 £10 £140
51-75 £25 £140
76-90 £100 £140
91-100 £120 £140
101-110 £140 £140
111-130 £160 £140
131-150 £200 £140
151-170 £500 £140
171-190 £800 £140
191-225 £1200 £140
226-255 £1700 £140
over 255 £2000 £140

*cars over £40,000 pay £310 supplement for 5 years

Cars registered between 2001 and 2017

The tax system used to work by charging the tax based off their CO2s and you paid the same rate every year.

Road Tax for cars registered between 1 March 2001 and 31 March 2017

The below rates are for the 2021-2022 tax year

VED BandCO2 Emissions (g/km) Standard Rate
A Up to 100
B 101 -110
C 111 - 120 £30
D 121- 130 £130
E 131- 140 £155
F 141 - 150 £170
G 151 - 165 £210
H 166 - 175 £250
I 176- 185 £275
J 186 - 200 £35
K* 201- 225 £340
L 226 - 255 £585
M Over 255 £600
* This includes cars emitting over 225g/km registered before 23 March 2006.

Click here to view Government site for VED changes