New VED Changes: How Much Will Road Tax Be In 2021?

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congested traffic faces higher road tax

From 1 April 2021, new-cars will be liable to pay slightly higher rates of Vehicle Excise Duty (VED), known commonly as road tax. Fuel duty will however remain frozen once again, the Government has announced.


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Road tax increase 2021


Unless your car produces zero CO2 emissions you will be liable to pay an annual road tax. The tax payable during the car’s first year of registration will vary. But from year two onwards it will be a flat rate of £155 per year, if the car was first registered on or after 1 April 2017.

Your first years road tax is calculated based on the vehicles CO2 emissions, and therefore electric vehicles (EV) and other zero emission-producing cars are exempt and face no charges.

A full breakdown of road tax for vehicles registered on or before 1 April 2017 has been detailed in the below table.


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Road tax for cars registered between 1 March 2001 and 31 March 2017


If your car was first registered between 1 March 2001 and 31 March 2017 – either because that is when you bought it or you have since bought a second-hand car registered between those dates – your annual tax payment will not be the flat rate of £155. The amount you pay is still based on the cars CO2 emissions however, and we have created another handy table to give you a full breakdown.


Even if you are exempt from paying road tax due to low emissions – you still have to tax your vehicle, you just won’t have to pay.


‘Expensive car’ tax 2021

jaguar f-type among expensive cars over £40,000

The additional tax applied to cars costing over £40,000 is still applicable, and has increased by £10. If you buy a car after 1 April 2021 that is worth more than £40,000 then you will be required to pay an extra £335 a year for years two to five (£1,675 in total) on top of your road tax. Pure electric models are exempt from this tax.


Company car tax 2021


Tax payable on company cars is not set to change for most cars in 2021. The Benefit-in-Kind (BiK) tax rates for petrol, diesel, and hybrid cars will remain exactly the same – the only slight increase coming to electric and hydrogen fuel-cell cars.

Both types of zero-emission-producing cars will no longer be exempt from paying company car tax rates, and will instead be moved up to the 1% BiK rate category.


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Fuel duty 2021

fuel tax increase originally planned now scrapped

Fuel duty will also see no increase and will remain at 57.95p per litre for 2021 at least.

Traditionally, fuel duty – which can account for up to 50% of your fuel costs – has risen in line with inflation. However it has been frozen since 2009 and is embarking on its 11th consecutive year at its current price.

This is because chancellor Rishi Sunak was reluctant to increase the costs at a time when the public need their cars the most in order to better follow social distancing rules.


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