Why am I paying £710 a 12 months in automobile tax whereas my neighbour solely pays £190 for a similar make of automobile?
- We explain how the age of your car can determine how big your VED bill is
I own a 2015 BMW M5 and it now costs me £710 a year to tax but I was talking to my neighbour who owns a similar model and he only pays £190 a year.
He said this is because his version of the car is newer and car tax rates are lower, how does this work and how can this be fair?
Is my car tax likely to get even more expensive?
![How is it possible that people can have a similar car model but their annual car tax bill can vary by over £500?](https://i.dailymail.co.uk/1s/2025/01/29/10/94589553-14332887-How_is_it_possible_that_people_can_have_a_similar_car_model_but_-a-17_1738145590652.jpg)
How is it possible that people can have a similar car model but their annual car tax bill can vary by over £500?
Freda Lewis-Stempel, motoring reporter, replies: There’s nothing more infuriating than chatting to someone and finding out you’re spending more on what seems to be exactly the same ‘product’.
Unfortunately, although it makes sense that you should be paying the same amount of car tax for the same make of car, the system of Vehicle Excise Duty (VED) or road tax isn’t that simple.
The road tax system seems to get progressively more confusing each year, and it has changed substantially over time.
Understanding how much you need to pay this year with the Government’s latest VED updates can be a headache.
But essentially the amount you pay for road tax each year comes down to the year your car was first registered and fuel type.
So, while we can explain how it works and whether it will get more expensive, it’s hard to justify if it’s fair or not…
Steve Gooding, director of the RAC Foundation, said: Successive Chancellors have sought to tweak the VED system to pursue government’s twin desires to cut car emissions by incentivising purchase of cleaner models and to continue to collect the motoring taxes that help fund wider public spending.
‘The result is today’s somewhat bewildering patchwork of VED bands which vary with the age of a car, its value and how much CO2 it emits.
‘No wonder drivers sometimes look with envy at the tax breaks benefitting their neighbour’s car.’
Here’s how VED works in 2025
![For cars registered between 1 March 2001 and 31 March 2017 the amount of VED you pay will be split into CO2 bands. The lower the CO2 emissions, the lower the VED rate](https://i.dailymail.co.uk/1s/2025/01/28/10/94589579-14332887-image-a-4_1738059374060.jpg)
For cars registered between 1 March 2001 and 31 March 2017 the amount of VED you pay will be split into CO2 bands. The lower the CO2 emissions, the lower the VED rate
VED or road tax bands are based on engine size or fuel and CO2 emissions, depending on when the vehicle was first registered.
If the car was registered on or after 1 April 2017 it will fall into one of three VED bands: zero, standard or premium.
Then for cars registered between 1 March 2001 and 31 March 2017 the amount of VED you pay will be split into CO2 bands.
The lower the CO2 emissions, the lower the VED rate.
Why are you paying £710 instead of £190?
Your car is falling in the category of cars registered after March 2001 and before April 2017 – a 16-year period. So instead of paying a standard fee, your car’s VED is based on emissions levels.
There are 13 bands, A to M, with A being the cheapest and M the most expensive.
VED band | CO2 emissions | Annual rate |
---|---|---|
A | Up to 100g/km | £0 |
B | 101-110g/km | £20 |
C | 111-120g/km | £35 |
D | 121-130g/km | £160 |
E | 131-140g/km | £190 |
F | 141-150g/km | £210 |
G | 151-165g/km | £255 |
H | 166-175g/km | £305 |
I | 176-185g/km | £335 |
J | 186-200g/km | £385 |
K | 201-225g/km | £415 |
L | 226-255g/km | £710 |
M | Over 255g/km | £735 |
A car that falls into Band A, up to 100g/km of CO2, pays £0 annual VED, while a car that falls into Band M, over 255g/km, will pay £735.
And unfortunately, because your car produces 226-255g/km of CO2 it falls into Band L, the second most expensive band, and therefore you’re having to cough up £710.
Your neighbour is only paying £190 because his car, even though it’s the same model, is newer so falls within the cars registered after April 2017 section.
That’s when the system for car tax changed to the zero, standard and premium bands.
For the first year these cars pay a ‘showroom tax’ based on emissions levels and then subsequent years they pay a standard rate of VED of £190.
So, if it helps lessen the sting at some point your neighbour (if he bought his car new) would have paid £2,340 tax for his car’s first year on the road.
Will your car tax get more expensive?
VED fees are adjusted each spring to reflect changes in inflation (Retail Price Index/RPI).
This is standardly the case, and you could see your VED rates rise each year.
However there are rises that don’t directly change your car’s VED rate but are worth bearing in mind incase you change to a newer model.
All cars emitting between 1-50 g/km of CO2 – most plug-in hybrids fall into this category – will see the first year tax bill rise to £110, up from just £10. This is to incentivise EV uptake.
New cars emitting between 51-75g/km of CO2 will increase from £30 to £135.
All other rates will double next year.
CO2 (g/km) | Petrol & diesel cars now | Petrol & diesel cars from 1 April 2025 | Alternative fuel (self-charging and plug-in hybrid) cars now | Alternative fuel (self-charging and plug-in hybrid) cars from 1 April 2025 |
---|---|---|---|---|
0 | £0 | £10 | £0 | £10 |
0-50 | 10 | £110 | £0 | £110 |
51-75 | £30 | £130 | £20 | £130 |
76-90 | £135 | £270 | £125 | £250 |
91-100 | £175 | £350 | £165 | £330 |
101-110 | £195 | £390 | £185 | £370 |
111-130 | £220 | £440 | £210 | £420 |
131-150 | £270 | £540 | £260 | £520 |
151-170 | £680 | £1,360 | £670 | £1,340 |
171-190 | £1,095 | £2,190 | £1,085 | £2,170 |
191-255 | £1,650 | £3,300 | £1,640 | £3,280 |
226-255 | £2,340 | £4,680 | £2,330 | £4,660 |
Over 255 | £2,745 | £5,490 | £2,735 | £5,490 |