When you’re getting a new car it’s not just the price of the car itself that you need to budget for but all the associated costs – one of which is car tax.

Other associated costs include:

• Fuel
• Insurance
• Maintenance and upkeep
• Servicing
• Bridge passes
• Parking permits
• Low emission zone / clean air zone charges

In this article we’re going to focus on tax but we’ll explore the others in upcoming blog posts to help you understand the associated vehicle costs and factoring them into your Mercedes lease decision.

What is Car Tax?

Car tax, also known as road tax or its official name Vehicle Excise Duty (VED) is a tax that you have to pay to drive your vehicle in Britain legally.

What’s the Punishment for Driving Without Tax in the UK?

All UK vehicles need to be taxed and driving without tax is a criminal offence that can be punished by a fine of up to £2,500 or three times the tax value and points on your licence which can result in a driving ban or suspension depending on the number of points you already have.

Why Do We Pay Car Tax?

The money raised by car tax is held in a central fund that is then used to improve UK roads, paying for essential maintenance work, expansions and other projects that make them better for all road users.

Who’s Exempt from Car Tax?

Under current legislation, electric vehicles do not need to pay road tax if their purchase price is under £40,000. This is only the case for fully electric vehicles and you will still need to pay road tax on these.

Cars that are over 40 years old are exempt from paying road tax. This means that if your car was first registered before 1982 you will not need to pay tax.

If you are leasing a car then this will be brand new and you will not be eligible for an exemption based on the vehicle’s age.

Exemptions are also available for vehicles used by a disabled person, those used by organisations to transport disabled passengers.

How is Car Tax Calculated?

Road tax is calculated based on different factors depending on the age of the vehicle.

If the car was first registered before the 1^st of March 2001 then it will be taxed based on the size of it’s engine.

If your car was first registered between the 1^st of March 2001 and the 1^st of April 2017 then it will be taxed on the car’s official CO2 emission levels.

For vehicles registered since the first year’s tax will be based on the car’s emissions and then at a flat rate for the following years. If you have diesel vehicle there will be an additional charge for cars that don’t comply with Euro 6 emission standards.

All lease vehicles are brand new vehicles so will be taxed under these rules.

How Much is My Car Tax?

The amount you need to pay in road tax will vary depending on the vehicle you drive but you can easily check what the tax on your vehicle is on the government’s website here:

https://www.gov.uk/check-vehicle-tax

How Often Do You Pay Car Tax?

Car Tax is an annual amount, and you can pay this in one lump sum, two six-month payments or monthly direct debits.

Who is Responsible for Taxing a Lease Car?

The good news is that if you’re leasing your car then you don’t need to worry about taxing the vehicle! As the lease funder is the registered owner of the vehicle they will be responsible for paying the tax.

One thing to be aware of with a lease car is that your funder might charge you if there is an increase in the amount the vehicle is taxed at between the first year and the following year. They will only charge you the difference between the amounts and this will be a one off payment that you will see appear on your invoice.