Car tax changes in 2021: What do I need to know?
Owners of cars with the highest emissions get the biggest hikes in road tax, but electric cars still benefit from a zero rate of VED...
Vehicle excise duty (VED) on all but the cleanest new and used cars rises from 1 April. The increases are generally calculated in line with inflation based on the Retail Price Index (RPI).
For most drivers of new and older cars, the annual cost will go up by around £5, but drivers of new vehicles with the highest emissions will pay £70 more in the first year. The first-year rate of car tax is based on the car's CO2 emissions, and from 1 April 2021 only pure electric vehicles will continue to be exempt from VED.
The additional 'expensive car' VED for new cars costing more than £40,000 still applies to all cars except pure electric models – plug-in hybrids are not exempt from it. Anyone buying a new car costing more than that from 1 April will have to pay £335 a year for years two to five (a total of £1675) on top of the standard rate of VED for the vehicle.
As in the past, VED costs vary depending on a car’s CO2 emissions and whether it’s a petrol or diesel. Diesel cars that don’t meet the RDE2 emissions standard – which became mandatory in January 2020 – will continue to be stung with higher VED payments than their petrol counterparts. See rates below.
After the first year, all petrol and diesel cars first registered after 1 April 2017 attract a flat rate of £155, while hybrid owners will pay £145 a year.
First-year car tax rates from 1 April 2021
|CO2 emissions||All cars inc RDE diesel||Non-RDE diesel|
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 that date, the amount of car tax you pay will depend on the car's emissions. Below are the VED rates for cars registered between 1 March 2001 and 31 March 2017.
|VED band||CO2 emissions (g/km)||Annual rate|
|A||Up to 100||£0|
|M||More than 255||£600|
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, their owners will still get an annual renewal reminder and must apply for road tax, even though there is nothing to pay. Anyone ignoring the renewal notice runs the risk of a fine of up to £1000.
Research from 2019 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 of 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.
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 the free What Car? New Car Deals buying service to see how much we could save you.
10. Kia Soul EV
It might look like a bit of an oddball, but the Kia Soul EV actually makes a lot of sense because it offers strong performance, an impressively long range and comes very well equipped. Just bear in mind that, while its usefully compact by SUV standards, that does cause the boot to be on the small side.
9. Jaguar I-Pace
Jaguar’s first electric car can travel for more than 250 miles on a charge in real-world conditions. What's more, it's fast, fun to drive and has the classiest interior of any Jaguar to date. There are rivals that cost less to buy and can be charged at a faster rate, but the I-Pace is still a very appealing choice.
8. Renault Zoe
The Renault Zoe is one of the cheapest electric cars you can buy new – both outright and on PCP finance. Plus, running costs are low and it has a longer range than many rivals. Peugeot's e-208 is a better all-rounder, though.
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