Road Tax and Car Insurance: Understanding Annual Fees

Road Tax (VED): Filling the Government’s Tank

Many people are not sure exactly how road tax works. Not to fear, we have the answers! Road tax, officially called Vehicle Excise Duty (VED), is a yearly fee that contributes to the upkeep of Britain’s roads. The amount you pay every year is based on engine size, or fuel type and carbon dioxide emissions, depending on when the vehicle was first registered: 

• Registered After April 1st, 2017: These cars are taxed based on CO2 emissions. Zero-emission vehicles are currently exempt, but this changes in April 2025. Petrol and diesel cars with low emissions typically fall into the standard rate of £190 per year after the first year’s rate (based on emissions). There’s also an additional premium car tax of £410 per year for the first five years (on top of the standard rate) for cars originally priced over £40,000. 

• Registered Between March 1st, 2001 and March 31st, 2017: These cars have a band system (A to M) based on CO2 emissions. The lower the emissions, the lower the tax band. 

• Registered Before March 1st, 2001: The system for these cars is more complex and depends on engine size. 

Road tax is compulsory in the UK and is charged every year. ANPR cameras can be either at the roadside or in police vehicles to check vehicle reg plates to see whether they are taxed correctly. When you register your car for tax, the system will automatically verify two things: 

• Valid MOT: Your car needs a valid MOT test if it’s over three years old (four years in Northern Ireland). 

• Active Car Insurance: You must have active car insurance coverage for the vehicle. 

If you don’t have both in place, then you will be unable to tax the vehicle. If you want to know how to check MOT and Road Tax of a vehicle, the government website can tell you whether a vehicle has a valid MOT and Tax: 

Check MOT: https://www.gov.uk/check-mot-status  

Check Road Tax: https://www.gov.uk/check-vehicle-tax  

Car Insurance: Protecting Yourself and Others

Car insurance is mandatory by law in the UK. It safeguards you financially if you’re in an accident, protecting you from covering the costs of repairs or injuries to yourself, others, or their property. 

The cost of car insurance varies depending on several factors, including: 

• Your Age and Experience: Younger drivers with less experience typically pay more. 
• Your Location: Urban areas with higher accident or crime rates usually have pricier insurance. 
• Your Car’s Type and Value: Generally, more powerful or expensive cars cost more to insure. 
• Your Driving Record: Any past accidents or endorsements can significantly increase premiums. 
• Your Level of Cover: Third-party only (minimum legal requirement) is the cheapest, but comprehensive cover (including damage to your own car) offers broader protection.

What are Car Insurance Groups?

In the UK, car insurance groups are a key factor determining your car insurance premium. But how do insurance groups work? There are 50 groups, ranging from 1 (cheapest to insure) to 50 (most expensive). Insurers use this system to assess the relative risk of insuring a particular car. Lower-grouped cars are typically smaller, less powerful, and have good security features, resulting in cheaper repairs and parts. Conversely, high-performance cars with expensive parts and repair costs fall into higher groups. 

So, if you’re looking to save on car insurance, consider factors like engine size and security features alongside the make and model, as these can significantly impact your insurance group rating.  

If you wish to get the best possible rate for your insurance, we suggest using a comparison site to look at multiple quotes and decide which one gives you the cover you need at the price you want.  

Knowing Your Costs Before you Buy

While the exact figures can vary, understanding the general structure of road tax and car insurance allows you to better estimate the annual costs of owning a car. Here’s a quick tip: When browsing car options online, many websites include estimated insurance costs alongside the car price.  

Ready to Hit the Road with Confidence?

By understanding road tax and car insurance, you can factor these annual fees into your car buying decision. These are yearly costs, so set a reminder for when they are due! Many insurance companies drop you an email to tell you your renewal is up.  

Remember, CarMoney can help you find the perfect car finance deal to fit your budget. Get in touch today and let’s get you on the road!