Tax free cars

Find out which cars are exempt from road tax and how much you can save.

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If you’re thinking about buying a new car, you might be doing a fair bit of research to find the best deal for your perfect set of wheels. But have you considered the money you’ll need to fork out every year to keep your car on the road? Insurance, an MOT certificate and road tax can all add up. But it is possible to buy a car that could actually save you money in the long run.

Certain electric cars that have zero carbon dioxide emissions and which are valued at under £40,000 are currently exempt from paying road tax, which can help save you thousands of pounds upfront. But that’s not all, over time, you could make other savings too.

What is a tax free car?

Most of the vehicles you see on the road will need to have road tax. How much the road tax costs for each car really depends on how old the vehicle is, when it was registered and how much carbon dioxide it emits.

Every vehicle registered after 1 April 2017 has to pay road tax that is based on its carbon dioxide emissions for the first year of registration. Every year after this first year, vehicles will be taxed at a standard rate of £140 or £130 for those that use alternative fuel. Vehicles that use diesel, which is considered to be more polluting, can expect to pay even higher road tax.

There are some new vehicles on the market that currently do not have to pay any road tax at all and this is because they have zero carbon dioxide emissions. These are usually limited to cars exclusively powered by electricity and which cost under £40,000.

Which cars are tax free?

Some vehicles that are exempt from paying road tax include the following:

  • Electric vehicles that cost less than £40,000 and have zero carbon dioxide emissions
  • Vehicles that are 40 years old or older
  • Cars that were registered between 1 March 2001 and 31 March 2017 and that emit less than 100 grams of carbon dioxide for every kilometre driven
  • Vehicles powered by steam
  • Some owners with a disability might also get free road tax if they:
    • Own a mobility scooter or have an invalid carriage in their vehicle
    • Receive the higher rate of Disability Living Allowance that relates to mobility
    • Receive a War Pensioners’ Mobility Supplement

Even if you fall into one of the categories above and are exempt from paying any road tax, you will still need to make an application for road tax every year. Any vehicle that is incorrectly taxed, even for those that are exempt, could face a penalty.

How do I check if my car is tax free?

If you vehicle falls into one of the categories above, it is likely to be exempt from car tax. You can also check the current vehicle tax status of a car using the government website here.

What benefits are there to driving a tax free car?

As we’ve highlighted above, new cars that are considered to be tax free tend to be limited to electric cars. While electric cars are exempt from road taxes, there are several other benefits to driving an electric car. These include:

  • Better for the environment
  • Zero carbon dioxide emissions
  • Cheaper to run
  • Government plug-in car grant available up to £3,500 off the cost of a new electric car
  • Electricity is cheaper than petrol and diesel
  • Electric cars do not have to pay the London Congestion charge up until 2025
  • Electric cars are exempt from paying London’s Ultra Low Emissions Zone charge (between London’s North and South circular roads)
  • Cheaper insurance for electric cars
  • Electric cars can be cheaper to maintain

How much can I save with a tax free car?

You could save up to £4,320 in car tax over 5 years by choosing certain electric vehicles, compared to someone paying the highest amount of car tax.

The cost of car tax in the first year for vehicles registered after April 2017 ranges from £0 (for a zero-emission vehicle) up to £2,070 for a vehicle that emits over 255g of CO2 per km. After the first year, you’ll pay a car tax of £0 for an electric vehicle, £130 for an alternative fuel vehicle and £140 for a petrol or diesel vehicle, regardless of the size of emissions, on cars with a list price under £40,000. If your vehicle has a list price over £40,000, you’ll pay an additional £310 for the next 5 years, as well as the amount listed above for various fuel types.

However, if you’re looking to avoid car tax, the specific amount you can save with a tax free car very much depends on the electric car you choose to drive and your own circumstances. Several of the benefits listed above may apply to your own situation but other factors will also be taken into consideration, for example, when purchasing car insurance.

Does a tax free car impact my car insurance?

When looking at car insurance, you may indeed receive a discount for driving an electric car but your premium will not be based on this fact alone. Your premium will be calculated on a number of other details such as where you live, how old you are, what you use your car for, your driving experience and your claims history. Any one of these other factors may mean your premiums increase as a result.

It’s important to remember to do your research when buying car insurance. Look at what is included in the cover and not just the cost of it.

*Savings of £260 based on independent online research by Consumer Intelligence (November’ 19). 51% of car insurance customers could save £260.25.
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