How does car tax work and how much does it cost?

BUYING a car can be an expensive purchase, especially when considering the upkeep of insurance as well as buying petrol and cleaning costs.

Another fee that drivers must remember to pay (or risk being issued a hefty fine) is car tax, also known as Vehicle Excise Duty or road tax.

How does car tax work?

Car tax must be paid on all vehicles that are registered in the UK and driven - or kept - on a public road. 

If you are taking your vehicle off the road - for example keeping it in a garage - you must tell the DVLA and apply for a Statutory Off Road Notification (SORN).

You will then not be able to use the vehicle on the road again until you tax it.

There are several exemptions to car tax, for example if you own a "historic vehicle" which is 40 or more years old.

Owners of brand new cars that produce 0 grams of carbon dioxide emissions and have a price of less than £40,000 also do not have to pay car tax.

Other kinds of vehicles that are exempt from forking out for road tax are:

• Vehicles used by a disabled person
• Mobility vehicles and powered wheelchairs
• Electric vehicles (if your vehicle is hybrid electric you still need to pay tax)
• Vehicles used for agriculture, horticulture and forestry (for example tractors)

Even if you fall under one of those categories you must still tell the DVLA and gov.co.uk about your vehicle and renew your tax every year - though the cost will be £0.

How much does car tax cost?

Car tax varies depending on the type, age and carbon dioxide emissions of the vehicle.

According to the gov.co.uk website owners of cars registered on or after April 1 2017 need to pay tax when the vehicle is first registered.

The vehicle will then be covered for 12 months, with future payments then able to be paid in yearly or six-month instalments.

Car taxes are increasing by 10.1% from April 1 2024, with the basic rate rise from £165 to £180.

Drivers can check to see how much their car tax will cost - but make sure to multiply this by 10.1 to see what payments will be from April 1.

If you do not pay road tax you may be fined.

According to UK road laws, the DVLA normally charges £80 (reduced to £40 if paid within 28 days) for a car that has not been taxed or declared off-road.

If a vehicle is seen on the road and is therefore "being used" without tax a fine of £30will be issued, plus 150% of the outstanding tax.

How can I check if my car is taxed?

You can check if your car is taxed on the gov.co.uk website.

To see your vehicle's tax status you will need its registration number.

If you have recently applied for car tax just note that it can take up to two working days for your records to update.

How often do I have to renew my car tax?

Car tax must be renewed annually.

You can set up a direct debit payment that will automatically renew your tax every year so you do not need to do anything.

This can be done online or at a Post Office.

If you change your vehicle and therefore need to change your tax, the DVLA recommends cancelling your direct debit and contacting them to inform them of the changes.

They can then issue a refund for any full months of tax that have already been paid on your old car.