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New car tax rules when buying a car

Car tax has changed significantly in recent weeks, with the abolishment of the long standing tax disc and the introduction of new monthly payments. So how do the changes affect your new car and how much car tax can you expect to pay?

How is car tax calculated?

Car tax is calculated based on the carbon dioxide emissions for all vehicles registered since 2001, although it is still based on engine capacity for vehicles registered before this. Pre-2001 cars are taxed at either £145 per year for engines under 1550cc or £230 for engines 1550cc and above.

For cars registered since 2001, there are 13 bands, ranging from band A for cars producing less than 100g of CO2 per kilometre, to band H for mammoths that produce over 255g/km.

How the new rules affect buying a second hand car

Since 1st October, any remaining car tax is no longer transferable when selling your vehicle, so you will need to tax your new car straight away in order to drive it legally, much like your insurance. You can do this online in the usual way, using the New Keeper Supplement of the V5C or ‘log book’, or you can tax it at a Post Office.

If you sell or scrap a used car, or place it on a SORN notice, then you no longer have to apply for a refund of any remaining car tax. It will now be issued automatically when you inform the DVLA of the change of ownership.

How the new rules affect buying a new car

The good news is that with some vehicles, you may not need to pay car tax at all in the first year. As well as band A cars, which are always exempt from car tax, bands B to D – up to 130g/km – pay no road tax in the first year, in a bid to encourage drivers to choose less polluting cars.

By contrast, more polluting cars, in band H or above – producing over 166g/km of carbon dioxide – are taxed more heavily in their first year. For example, for vehicles registered after March 2001, a band H car, which will normally pay £205 per year, will pay £290 in year one, and a high pollution band M car, which normally pays £500 per year, will have to stump up an eye-watering £1,090 in car tax for the first year.

It is important to note that you cannot use the new monthly direct debit system to pay for your car tax, as first year has to be paid upfront – even if it is over a thousand pounds!

Find out more

There are lots of car tax resources online to help you out. You can check if a car is legally taxed and find out how much car tax you need to pay. You can also read more details of the changes to car tax that were made on October 1st on the DVLA website.

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One Quote Direct Insurance Services Limited trading as Octagon Insurance Services is an appointed representative of Europa Group Limited and acts as a credit broker and not a lender in relation to premium finance contracts. Registered as a limited company in England and Wales No. 5479983. Europa Group Limited is authorised and regulated by the Financial Conduct Authority, Financial Services Register No. 309794. Registered office: Europa House, Midland Way, Thornbury, Bristol, BS35 2JX.

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