Tax exempt cars

Fed up with paying annual road tax? Choose the right car and you won’t have to...

BuyaCar team
Sep 3, 2021

Everyone loves a bargain, and when you’re looking for your next car there are plenty of things to focus on that can save you money. The most obvious saving comes from choosing to buy nearly new or used instead of forking out on a brand new car. Letting somebody else take the financial punishment of new car depreciation is a no-brainer for bargain-hunters, and using the BuyaCar search to choose from nearly new models - many with just a few delivery miles on the clock - can save you literally thousands.

Other ways to save include haggling over a cash price, or bagging a low interest rate PCP deal, but canny bargain-hunters may also be looking for ways to save on running costs. One great way to reduce your annual bills is to pick a road tax-exempt car - and we’re here to tell you how.

The road tax system used to be nice and simple - everyone understood it. However when the government started using road tax to encourage the use of greener cars, things got a lot more complicated. The old system used for cars registered prior to 2001 is based on engine size. You pay £170 per year for cars under 1549cc capacity, and £280 per year for anything with a bigger engine.

Cars registered between March 2001 and March 2017 are the sweet spot for drivers who want to dodge road tax though, as during the period anything with a CO2 emissions figure of less than 100g/km got a free pass from the Chancellor, while cars emitting less than 110g/km and 120g/km paid £20 and £30 per annum respectively.

A rule change from April 2017 re-jigged the system, so although you can still get a first year road-tax saving based on your tailpipe emissions, everyone pays a standard rate of £155 (reduced by £10 for hybrids) per year after that. All except electric car drivers, who still benefit from the promise of zero rate road for the life of their cars.

When the system changed in 2017 the number of tax-exempt cars was drastically reduced. So if you're buying used, it's worth finding a car that was already on the road before the change, for a saving of at least £400 over three years. Read on for more details on buying a new or used tax-free car.

Road tax-free car deals
BMW 330e

BMW 330eBuyaCar prices from £16,399
Monthly finance from £301*

Renault Zoe

Renault ZoeBuyaCar prices from £10,995
Monthly finance from £235*

Skoda Citigo

Skoda CitigoBuyaCar prices from £5,000
Monthly finance from £108*

Cars with no road tax

In order for a new car to be classified as tax-free, it must produce zero exhaust emissions. This essentially restricts you to an electric car if you want to ensure you have no road tax to pay.

However, hundreds of thousands of used petrol and diesel cars remain tax-exempt and will typically save you more than £400 over three years, compared with buying a similarly powered car that's taxed under the new system. These are cars that were registered between March 2001 and March 2017 that produce less than 100g/km of CO2.

This list includes a number of hatchbacks such as the Hyundai i10 or the Audi A3, but, if you have the budget, you could also stretch to a Volvo V40, Nissan Qashqai, Mini Cooper D and even a Jaguar XE.

Before you go all-in though, it's worth being aware of the charges being imposed in city centres, which will affect most diesel cars, including many tax-free models. London has been operating its ULEZ (Ultra-Low Emission Zone) since April 2018, and most diesel cars that were on the road before September 2015 are subject to its £12.50 daily charge to drive in the centre of the capital.

Birmingham launched its own scheme in 2021, and more than a dozen other cities could create their own low emission zones in the not too distant future.

Most modern petrol cars are exempt, as are diesel cars that comply with the latest emissions standards, known as Euro 6 - this includes every car that was registered since September 2015, as well as some models that met the standards earlier. If you have the budget and you want a diesel, it's worth opting for a Euro 6 car.

Buying a new car with free road tax

If you're looking for a brand new car with free road tax, you’ll have to opt for something without exhaust pipes. As of April 2017, only zero emissions vehicles are road tax free.

All other vehicles are subject to a first-year tax rate that's based on their CO2 emissions, followed by a flat fee of £155 in each subsequent year - reduced by £10 if you drive a hybrid.

The Nissan Leaf, Hyundai Kona Electric, and Renault Zoe are among the electric cars that are tax exempt, but not all electric cars are taxed in the same way because the new car tax system includes what amounts to a wealth tax.

Owners of cars that had a list price of £40,000 or more when new, must pay a £310 tax surcharge for five years - starting from the car's second year on the road until its sixth.

This means that cars like the Tesla Model S and Jaguar I-Pace do not avoid the duty.

Taxing a tax-free car

People have been inadvertently breaking the law by not ‘taxing’ their tax-exempt vehicle. That’s because, even if you do own a tax-free car, you still need to apply for tax every year. Failing to do so can result in an £80 fine or your car being clamped. It could even be towed away.

Road tax exemptions

The most notable exemption from tax is for historic vehicles: those over 40 years old. The tax-free coding for these types of vehicles is rolling and changes every year. For example, vehicles made before 1 January 1979 were exempt from tax from 1 April 2019.

Vehicles used by a disabled person, disabled passenger vehicles, mobility scooters, powered wheelchairs, and invalid carriages are also tax-free.

*Representative PCP finance - Ford Fiesta:

48 monthly payments of £192
Deposit: £0
Mileage limit: 8,000 per year
Optional final payment to buy car: £2,923
Total amount payable to buy car: £11,926
Total cost of credit: £2,426
Amount borrowed: £9,500
APR: 9.9%

BuyaCar is a credit broker, not a lender. Our rates start from 6.9% APR. The rate you are offered will depend on your individual circumstances.

 

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