What is Car Tax?
What is car tax?
If you own a car, it’s a yearly legal requirement to pay car tax, and will cover your car for 12 months. Paying car tax is a necessary part of owning a vehicle, as the cost goes toward the government for improvements in our roads, and maintenance.
It’s based on your vehicle's CO2 emissions, which is why electric cars are exempt from paying. When your car was registered (it’s age), also makes an impact. From this, tax rates are divided into ‘bands.’
How to calculate your car tax
The government separates car tax depending on when your car was registered. Here are the three main categories:
1) Cars registered on or after 1st April 2017
The first time a car is registered, you will be charged a rate based on its CO2 emissions.
2) Cars registered between 1st March 2001 and 31st March 2017
The rate of car tax is determined by the type of fuel and the amount of CO2 emitted.
3) Cars and light goods vehicles registered before 1st March 2001
Car tax is calculated based on engine size
To calculate your car's road tax and work out how much you’ll need to pay, you can view vehicle tax rate tables on gov.uk or tax your vehicle and find out your rate here.
What vehicles are exempt from car tax?
The following types of vehicle are exempt from car tax, meaning you don’t have to pay.
Electric vehicles
Old vehicles (vehicles made before 1st January 1982)
Vehicles used by or for a disabled person
Mobility scooters & powered wheelchairs
Steam vehicles
Vehicles used for agriculture
You can read more here about the particular vehicles that are exempt from car tax here and why.
What is benefit in kind car tax?
You need to pay benefit in kind car tax if you own a company car, or van. However, if you’re only using it for business purposes, you’re exempt from paying.
The BIK rate, (Benefit in Kind), is determined by a variety of factors, including the vehicles CO2 emissions and fuel consumption, among other things.
You can use this calculator on the gov.uk website to calculate your company car tax rate.
What is car tax relief?
If you’re self-employed and have to use your own car or van for business purposes, i.e travelling between seeing customers, then you could be eligible for tax relief based on an approved mileage rate. You can view the approved mileage rates here.
Also, if you work for a business and use a company car you can claim tax relief for business trips. Your employer will likely reimburse your costs for the cost of fuel etc, but you’re able to claim any remaining money back through tax relief.