Introduction:
Road tax is a mandatory tax levied by the government on owners of vehicles that use public roads. This tax is a vital source of revenue for the government and is used to maintain roads and infrastructure throughout the country. Road tax, also known as vehicle excise duty, can be a significant expense for vehicle owners, and it is essential to understand how the tax is calculated and how it can be reduced.
How is Road Tax Calculated?
Vehicle excise duty is calculated based on a range of factors, including the age and CO2 emissions of the vehicle. The government sets a base rate for each vehicle type, which is then adjusted based on the age of the vehicle and its CO2 emissions.
In April 2021, the UK government changed the way road tax is calculated for new vehicles. Under the new system, all new cars will be subject to a first-year tax rate that is based on their CO2 emissions. After the first year, the car will then move to a standard rate of £150 per year, regardless of its emissions. Electric vehicles are exempt from the standard rate fee.
For vehicles registered before April 2017, the amount of road tax will depend on the CO2 emissions of the vehicle and its fuel type. For example, a petrol or diesel car with emissions of up to 100g/km will pay £0 per year, while a car with emissions of 151-170g/km will pay £210 per year.
In addition to CO2 emissions, the age of the vehicle will also affect the amount of road tax that is payable. For example, vehicles that are more than 40 years old are exempt from road tax.
Which Vehicles Are Exempt from Road Tax?
As mentioned previously, vehicles that are over 40 years old are exempt from road tax. Electric vehicles are also exempt from road tax, and this is an incentive for people to purchase electric cars and invest in renewable transport. Hybrid vehicles that emit less than 75g/km of CO2 are also exempt. It’s important to note that while electric vehicles are exempt from road tax, they are not immune from other taxes and charges, such as VAT and import taxes.
How Can I Lower My Road Tax Bill?
There are several ways to reduce the amount of road tax that you pay. One way is to invest in a car with low CO2 emissions. Cars that emit less than 100g/km of CO2 are exempt from road tax, saving you hundreds of pounds per year compared to a car with higher emissions.
Another way to reduce road tax is to invest in an electric vehicle or a hybrid vehicle that emits less than 75g/km of CO2, as they are exempt from road tax. Electric and hybrid vehicles have also been given other financial incentives including lower company car taxes and grants from the government to install charging points.
When you buy a secondhand vehicle, there are ways to reduce the amount of road tax payable, such as buying a diesel or petrol car with low CO2 emissions. Diesel vehicles may have lower CO2 emissions (most of the time) but they are not as eco-friendly and motorists have to pay additional fees and charges while driving in congestion zones or ultra-low emission zones (ULEZ).
Another way to reduce your road tax bill is to make sure you pay annually rather than monthly, as you’ll incur an additional charge if you pay monthly.
Conclusion:
Road tax is a necessary evil for vehicle owners, but it is important to understand the factors that impact the amount of tax payable and how it can be reduced. Buying a car with low CO2 emissions or investing in an electric car can save hundreds of pounds per year in road tax. With the government focusing increasingly on reducing pollution, investing in a low-emission vehicle can also help reduce other additional fees, such as congestion charges in London. With this knowledge, vehicle owners can reduce their road tax bill and also contribute positively to the environment.
What is the Road Tax?
A road tax is a form of tax that is levied on all users of federally-operated highway systems in the United Systems. The majority of developed nations place a road tax on an operator of a motor vehicle; typically the road tax is paid on a motor vehicle at the time of purchase or before it used on a public road.
Those countries who levy a road tax will attach different stipulations and intricacies in regards to the collection effort and the percentages which make up the tax itself. In the United States, each individual state will require an annual registration fee for the legal use of roads in the country. The fees attached to the registration are typically built into the price of the automobile; however, each state will implement its own registration fee.
The road tax will vary in regards to the taxation model depending on each state’s interpretation of the tax. For example, in Massachusetts, the registration fees attached to the road tax are billed separately from excise taxes; the governing agency of the town or jurisdiction in which the vehicle is registered is responsible for supplying the driver with a registration fee for the use of public roads. Typically, as is in the case of Massachusetts, the road tax is delivered as a fixed percentage rate (2.5% fixed rate in Massachusetts).
Within other states, the registration fees for the road tax will vary from county to county—some counties implement a surcharge for the use of each vehicle. An example of such a taxation model is seen in the form of Virginia’s personal property tax.
Other forms of road tax will implement a taxation model based on the vehicle being purchased or used. Some states will attach a registration fee based on the purchase price or total value of the automobile. In California, the road tax is calculated based on the current value of the vehicle in question. If the vehicle is old and relatively cheap, the registration tax will be proportionately low, whereas if the vehicle is new and expensive, the registration fee for the road tax will cost a few hundred dollars. In contrast, however, the state of New York, will charge their road tax based on the vehicle’s weight; these forms of road taxes are charged at the time of registration renewal.
Another form of road tax in the United States is the Federal highway use tax. This levy applies to all highway motor vehicles that possess a taxable gross weight of 55,000 pounds or more, including truck tractors, trucks, and buses. This form of taxation does not apply to vehicles that are driven less than 5,000 miles on public highways during a given fiscal year.
