Car tax changes in 2020 – what do I need to know?

Between the Government and the new official method of measuring CO2 emissions, the cost of taxing your car is on the rise for most, but expensive electric cars become £1625 cheaper to own...

Car tax changes in 2018 – what do I need to know?

Vehicle excise duty (VED) on most new cars is set to rise from 1 April this year, partly because the official carbon dioxide (CO2) emissions for cars will increase and partly because rates increase in line with inflation via the Retail Price Index (RPI). 

The first-year rate of car tax is based on the car's CO2 emissions, and from 1 April 2020 car tax bands are being based on the results of the new WLTP fuel economy tests, which are more realistic than the old NEDC tests. This means the CO2 figures for most models will be higher in line with their poorer fuel economy. Most cars are likely to go up by one band. However, all pure electric vehicles will continue to be exempt from VED. 

The other significant change for 2020 is that the additional £325 'expensive car' VED has been scrapped for new and existing electric cars costing more than £40,000. For anyone buying a new pure electric car from 1 April, this equates to a saving of £1625, because they no longer have to pay £325 a year for years two to six of ownership.

People paying the previous premium fee of £320 for cars bought before 1 April 2020 will no longer have to pay this additional fee. This exemption is due to last until 31 March 2025. 

A smaller increase across the board is due to VED rates being linked to inflation via the RPI. For most drivers of new and older cars, the annual cost will go up by £5. 

As in the past, VED costs will vary depending on a car’s CO2 emissions and whether it’s a petrol, diesel or hybrid. 

Diesel cars that don’t meet the RDE2 emissions standard – which became mandatory in January 2020 – will continue to be stung with higher VED rates than their petrol counterparts.

After the first year, all petrol and diesel cars first registered after 1 April 2017 attract a flat rate of £150, while hybrids are charged £140.

Find out about the new WLTP fuel economy tests

First-year car tax rates from 1 April 2020

CO2 emissions Petrol Diesel Alternative fuel
0 £0 £0 £0
1-50 £10 £25 £0
51-75 £25 £110 £15
76-90 £110 £135 £100
91-100 £135 £155 £125
101-110 £155 £175 £145
111-130 £175 £215 £165
131-150 £215 £540 £205
151-170 £540 £870 £530
171-190 £870 £1305 £860
191-225 £1305 £1850 £1295
266-255 £1850 £2175 £1840
Over 255 £2175 £2175 £2165

Car tax rates for cars registered between 1 March 2001 and 31 March 2017 

If you bought your car before 1 April 2017 or buy a second-hand car that was registered before this date, the amount of car tax you'll pay will depend on the car's emissions. Below are the VED rates for cars registered between 1 March 2001 and 31 March 2017. 

The rates for petrol and diesel cars are shown below. The rates for alternative fuel cars are £10 less than those of petrol and diesel models.

VED band CO2 emissions (g/km) Annual rate
A Up to 100 £0
B 101-110 £20
C 111-120 £30
D 121-130 £125
E 131-140 £150
F 141-150 £165
G 151-165 £205
H 166-175 £240
I 176-185 £265
J 186-200 £305
K 201-225 £330
L 226-255


M More than 255 £580

Why you still have to apply to tax your tax-free car

Owners of cars that qualify for free VED are being caught out by not applying to renew their road tax, even though they don’t have to pay the fee.

Many low-emissions cars that were first registered before 1 April 2017 and emit up to 100g/km of CO2 qualify for free VED. However, owners of these cars will still get an annual renewal reminder and must apply for road tax, even though there is nothing to pay. Ignoring the renewal notice runs the risk of a fine of up to £1000.

Research last year revealed that more than 71,000 people failed to tax their zero-rated cars over the previous three years, with more than £1.1 million in fines being issued as a result.

The DVLA requires every car to be either taxed (even if it’s free) or declared off the road by filing a Statutory Off Road Notification (SORN) every year. It claims this ensures an up-to-date record of car ownership in the UK and whether those cars are being used on the road.

Cars first registered between 1 March 2001 and 31 March 2017 and producing 100g/km of CO2 or less qualify for free VED. As for cars registered after 1 April 2017, only zero-emissions electric vehicles are eligible for free VED; everything else is charged according to their CO2 emissions.

Many of the cars rated at 100g/km or lower are diesels, but only Euro 6-compliant models (in other words, those first registered after September 2016) are exempt from inner-city low-emissions zone charges.

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Best electric cars - and the ones to avoid

Electric cars are now entering the mainstream, and their rise is only going to accelerate as rules are introduced to limit the kind of vehicles allowed into major cities.

The main thing that has traditionally prevented them selling in greater numbers is range anxiety – the fear that you won’t have enough juice to get to where you’re going. However, with plenty of models now capable of covering more than 200 miles between charges, this is becoming less of an issue.

So, which electric cars should you consider? Here, we count down our favourites and tell you the ones to avoid. And, remember, if any of them take your fancy, check out our What Car? New Car Buying to see how much we could save you.

10. Seat Mii Electric

Save money on a new Seat Mii Electric with What Car? >>

Seat Mii Electric 2019 LHD front cornering shot

If you're looking for a small electric car to primarily use in the city, the Mii Electric should definitely be on your shortlist. It might not have the range to match larger electric cars, but that means its price is kept sensible, and we reckon 161 miles on a full charge should be enough for most buyers. 

Read our full Seat Mii Electric review >>

9. Mercedes EQC

Save money on a new Mercedes EQC with What Car? >>

Mercedes-Benz EQC front three quarters

The EQC is a brilliant choice if you want to maximise the peace and quiet offered by going electric: it really is incredibly hushed on the move. But while it's generally comfortable on motorways, it doesn't ride as well as the very best rivals and its range is some way off the Jaguar I-Pace's.

Tesla Model S

Tesla's quiet and comfortable Model S saloon is as capable as it is desirable, offering staggering performance and an impressive range. It’s practical, too, while almost all of the car’s controls are accessed via a massive 17.0in touchscreen that's easy to personalise and updates wirelessly to bring new features as they're rolled out.

Read our full Tesla Model S review >>

Next: more of our favourite electric cars >>

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