Company car tax explained - Road tax

Road tax is officially known as Vehicle Excise Duty (VED). Since March 2001, the rate you pay has been based on your vehicle's carbon dioxide emissions.

While most company car drivers will have their vehicle taxed for them, it is important that they understand why companies may prefer to choose certain types of vehicle to keep their costs down.

As with company car tax, vehicles are categorised according to their carbon dioxide emissions and placed into a band ranging from A to G.

The final charge is then calculated according to whether the car is a petrol, diesel or alternatively fuelled.

Cars which emit less than 100g/km of carbon dioxide are in band A and are not taxed, while vehicles that emit 226g/km or more are in band G and are currently taxed up to £300 (this band will go up to £400 in 2008).

The VED scheme only affects cars registered after March 1, 2001 - those registered before that date pay the standard VED rate of £180 unless they have an engine below 1549cc, in which case they receive a £65 discount.

An online calculator to help you work out your VED costs can be found by clicking here