British drivers paid £33 billion in fuel duty and vehicle excise duty – commonly known as road tax – in 2021/22 alone, according to a Centre for Policy Studies report. And, for those looking to reduce their motoring expenses, keeping their money out of the road tax pot, could be a great place to start.
Road tax can cost up to £2,745 a year depending on the car’s CO2 emissions and fuel type. Experts say the answer is tax-exempt cars, but they won’t be around for much longer. Any car registered between May 2001 and April 2017 is placed into bands that range from A to M, which are based on CO2 emissions.
Cars in band A (meaning their CO2 emissions are lower than 100g/km) are exempt from road tax. But Band A is effectively being removed on 1 April 2025, so all cars currently in band A will move to band B and are eligible for road tax from that date onwards.
On 1 April 2025, electric vehicles (EVs) will also have to pay road tax for the first time. Currently, those with EVs can enjoy free road tax because no exhaust emissions are produced. The only exception is when a car is worth over £40,000, with drivers paying an additional luxury car fee of £410 for the first five years.
However, then Chancellor of the Exchequer Jeremy Hunt altered these rules in 2022, explaining: “To make our motoring tax system fairer, I’ve decided that electric vehicles will no longer be exempt from Vehicle Excise Duty.”
Commenting on the 1 April 2025 changes, Sam Sheehan, motoring editor at cinch, said: “The appeal of having no road tax to pay has been a draw for drivers looking to switch to EVs in recent years. However, while the 2025 VED changes will mean running an EV will become slightly more expensive, they’re still likely to be cheaper to run than a diesel or petrol car when fuel costs are factored in.”
Whether you currently drive a car that’s exempt from road tax or not, it’s worth remembering what could happen if you don’t pay it. First of all, you’ll get an £80 fine and still need to pay for the amount of time your car hasn’t been taxed.
And if you don’t pay these, your car could be clamped or even crushed. Road tax debt might also be passed onto a debt collection agency if it repeatedly isn’t paid.
More tips for bringing car running costs down
Finding a vehicle with no or low road tax isn’t the only way to keep your car running costs down.
When in the market for your next set of wheels on a budget, consider the following:
· Look for a car that’s in a low insurance group
· Remove fuel costs by selecting an EV, or at least lower how much you spend on fuel with a hybrid car
· Choose a car with high miles per gallon (MPG) figures than others in its class, as it’ll be more frugal on the road
Sheehan adds: “You can also maximise fuel efficiency (and minimise running costs) by accelerating gently, slowing down early and gradually before traffic lights or a queue, and turning off the air-con when you don’t need it.”