2021 Road Tax – How much will it cost to tax my car this year?

Government announce 2021 road tax price increase

Drivers can expect to pay more each year to legally keep their car on the road, thanks to an increase in road tax prices in the Government’s 2021 budget.

It has been announced that prices will increase, despite Chancellor Rishi Sunak confirming that he was scrapping plans to increase fuel duty.

There had been rumours suggesting that we were set to see the first fuel duty increase in 10 years, however, they remain the same, as confirmed in the 2021 budget.

While fuel prices will stick, Vehicle Excise Duty (VED) or, as its better known, road tax, is going up as it traditionally does in line with inflation. 

How much road tax will I pay?

How much more you will have to pay beyond your first year will ultimately depend on your car’s CO2 emissions. 

As the world edges closer to greener driving, those who have cars emitting fewer CO2 emissions will be rewarded.

Electric vehicles that emit zero CO2 emissions will not pay any road tax, both for the first-year rate and standard rate beyond that.

There are no price hikes for drivers of petrol and most diesel cars that fall into the category of either 1-50g or 51-75g of CO2/km, who will pay £10 and £25 respectively as their first-year rate - this also includes hybrids. Thereafter, there is a £5 increase, taking the standard rate to £155. 

The new Government prices mean that there is also a £5 increase for those who drive cars emitting between 76-90g CO2/km, paying £115 as their first-year rate and £155 as their standard rate beyond that.

Drivers hit hardest by the hike in prices are those behind the wheels of cars emitting a massive 255+g/km, who will now pay £2245 for their first year, a £70 increase from last year. 

If your car is powered by either biofuel or liquid-petroleum gas, then your road tax will only cost £145 per year, rather than £155.

Do the new road tax prices affect company cars?

The 2021 road tax price hikes will mean a minor change for company car tax. Fully electric and hydrogen fuel-cell cars will no longer be fully exempt from company car tax charges. This had previously been the case, but because of these changes, they will now be charged with 1% BiK tax for the 2021/22 tax year.

However, the Benefit in Kind tax rates themselves for petrol and diesel company cars are not set to change as a result of the 2021 budget.

Two Clean Air Zones to be introduced

Bath and Birmingham will both open Clean Air Zones during 2021, with the former launching later this month.

Birmingham’s Class D Clean Air Zone will launch in June, while London will expand its Ultra Low Emission Zone (ULEZ) in October.

According to the Birmingham Mail, it could cost drivers in the local area around £8 per day to use the Class D Clean Air Zones, which equates to £40 over the course of a working week.

What is a Clean Air Zone?

A Clean Air Zone is an area of road where the local authority wants to improve its air quality. There are two types of Clean Air Zones, non-charging and charging.

When you drive in a charging Clean Air Zone, drivers will be charged for the use of the road if their vehicle’s CO2 emissions do not meet the environmental standards.

In a non-charging Clean Air Zone, you will not be charged for entering this zone, but you may notice some extra measures in place, like traffic flow systems, to try and improve air quality.

If you would like to check whether your next journey could entail driving through a charging or non-charging clean air zone, you can check this via the Government website. 

What does this mean for car lease deals in 2021?

The road tax changes could affect the price of your car lease deal, depending when the car is registered. Road tax is included within your lease cost based on the prevailing rate. So customers taking delivery in March could make a saving compared to those doing so after the VED changes take place on 1st April. 

As they are already registered, all pre-registered lease cars ahead of 31st March will be exempt from these VED price changes. 

Any applicable lease deals will be requoted with the VED price increase spread across the lease term. 

If you have any questions about the rise in road tax, speak to your leasing consultant and they will be more than happy to provide as much information as possible.

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