Checking your car tax: what you need to know

Since discs were abolished, there has been a spot of confusion over car tax. To clear things up we've put together a guide on what you need to know about car tax.

Check if your vehicle is taxed

First of all, check if your car is actually taxed. The Government has a new service which can check the tax details of your vehicle - make sure you have your registration number and vehicle make to hand. You can also check the vehicle tax rates and the date of the latest V5C if you have your V5C reference number.

Be aware that it can take up to five days for newly-taxed vehicles to appear online.

Getting a new V5C or V5C/2

As you’ll know, a V5C (logbook) is vital for taxing your motor.

If you’re the current keeper, you need to apply for a new V5C and tax your vehicle at the Post Office. You'll need to fill out a V62 registration form which will set you back £25 and it can take four to six weeks to get your new logbook.

New keepers will need a V5C/2, but you'll also need to apply for a V5C which you can do in the same way as above.

Car tax bands

In his 2016 Budget speech, George Osborne announced that Vehicle Excise Duty (VED) rates for cars, vans, motorcycles and motorcycle trade licences will increase by the Retail Price Index from the beginning of April.

As you can see from the table below, the tax band is based on carbon emissions and your first year rate will differ from your standard rate. ​As it stands, any car that produces less than 100g/km of carbon dioxide you don’t pay Vehicle Excise Duty. New cars get a lower rate of car tax and a second rate after that, both are based on the amount of carbon dioxide the car emits.

From 1 April 2017, vehicles that were constructed more than 40 years before 1 January that year will automatically be exempt from paying VED. At the moment it’s up to the owner of the vehicle to tax it in historic class.

Lower-emission vehicles

You’ve only got a year to go to buy a hybrid car tax-free.

The new system also has a special first-year rate based on CO2 emissions but from the second year onwards there’ll be a standard £140 annual charge that applies to all cars, no how much carbon dioxide they emit. So even if you buy a fully electric model, you’ll be hit by quite a hefty tax.

After the first year, any car that costs over £40,000 will be subject to an additional £310 payment for five years, which comes to £450 a year between the second and sixth years of buying your car.

Only zero-emission cars will be exempt from the charge.

These rates only apply to cars that are registered from April 2017 - cars that are already on the road will continue to be taxed under the old system, so get those hybrids now!

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Company car tax

You pay tax if you or your family use a company car for private use, including commuting. That said, you’re only paying tax on the company car’s value to you, which depends on things like how much it would cost to buy on the market and the type of fuel it uses.

That means the value will be reduced if you only have it part-time, pay something towards its cost and it has low carbon emissions. If your employer pays for fuel you use for personal journeys, you’ll pay tax on this separately.

Company car tax is measured by Benefit In Kind rates, based on CO2 emissions and the list price (including extras and VAT) but not the first year registration fee and vehicle tax. To calculate your tax, multiply the list value of your car by the BIK percentage banding, then multiply that by your Income Tax band percentage.

So if your petrol car is £21,000 in total and is in the 20% BIK band, that would be £21,000 x 20%, or £4,200. If you’re a basic-rate taxpayer, you’d multiply that £4,200 by 20% as well, so you’d be paying £840 a year, or £70 a month, in company car tax.

Diesel cars have an extra 3% added so for the same car you'd have £4,830 in taxable benefits (£21,000 x 23%) multiplied by 20% would pay £966 a year or £80.50 a month.

For a bit of extra help you can use the Government's company car tax calculator.

Renew with your V11 reminder letter

DVLA still sends out reminders to all motorists who don’t pay by direct debit - those who do will receive a direct debit reminder instead.

You can use the V11 reminder which you can process through the Government’s website- the 16-digit reference number at the top is the key bit of info you need. Your ‘last chance’ warning letter can also be used to pay. It’ll have a 16 or 11 digit reference number on the right-hand side of the page.

Source: gov.uk

Other ways to pay

Pay your tax online using the 11 digit reference number from your V5C or the 12 digit from the V5C/2 if you’re the new keeper and don’t have a V5C in your name.

You’ve the option to pay in annual, six-monthly or monthly instalments via direct debit. Before you jump in, you should know that there’s a 10% surcharge on bi-annual payments and a 5% surcharge on monthly payments.

Ring up the DVLA on 0300 123 4321 (up to 12p per minute on landlines and 3p to 45p from mobiles) to tax your car by phone. Keep your V5C or V5C/2 handy. 

Some Post Office branches deal with vehicle tax. Of course, you’ll need a logbook, a V62 application for a registration certificate if you’re the current keeper or a V5C/2 new keeper supplement if you’re a new keeper without a V5C in your name. You might also need a payment for your vehicle tax, an MOT test certificate that’ll be valid for the start of the vehicle tax and valid reduced pollution certificate. Check with the branch before you visit just to make sure.

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