How Much Tax Do I Pay?

As Benjamin Franklin once famously remarked: “In this world nothing can be said to be certain, except death and taxes.”  We pay tax on everything from our income to our home and our groceries and so our guide looks at how much tax you can expect to pay.

Income Tax

There are several different tax bands and rates depending on your income.  The question “How much tax do I pay?” will therefore depend very much on your specific personal circumstances such as the tax allowances that you are eligible for and where your income comes from.

Typically, you’ll pay the following tax in the 2011/12 tax year:

  • 0% on the first £7,475 that you earn (this is your Personal Allowance)
  • 20% on the next £37,400 that you earn
  • 40% on the next £112,600 that you earn
  • 50% on anything over this

National Insurance Contributions

The amount of National Insurance contributions that you pay will depend on whether you are employed or self employed.

If you’re employed you pay Class 1 National Insurance contributions at the following rates:

  • if you earn more than £139 a week and up to £817 a week, you pay 12 per cent of the amount you earn between £139 and £817
  • if you earn more than £817 a week, you also pay 2 per cent of all your earnings over £817

If you’re self-employed you pay Class 2 and Class 4 National Insurance contributions at the following rates:

  • Class 2 National Insurance contributions are paid at a flat rate of £2.50 a week
  • Class 4 National Insurance contributions – you pay 9 per cent on any profits between £7,225 and £42,475, and a further 2 per cent on profits over that amount

VAT

Value Added Tax (VAT) is a tax that you pay when you buy certain goods or services.  Most goods and services in the UK are subject to VAT and the tax is payable at one of three rates:

  • Standard rate (20%) – Most goods and services attract VAT at this rate
  • Reduced rate (5%) – On certain goods such as children’s car seats and gas and electricity for your home
  • Zero rate (0%) – There are some goods on which you don’t pay any VAT such as most foodstuffs, books, children’s clothes, magazines and newspapers

Other Taxes

As well as these three main taxes there are other taxes that you may pay.  Again, the rates vary depending on your specific circumstances.

The main other taxes are:

  • Inheritance Tax (IHT) – Payable if your estate (including any assets held in trust and gifts made within seven years of death) is valued over the current Inheritance Tax threshold (£325,000 in 2011-12).  The tax is payable at 40%
  • Capital Gains Tax (CGT) – Payable on capital gains’ (any profit that you make when you sell or give away an asset if it has increased in value.  The tax is payable at 10%,18% or 28% depending on your circumstances
  • Road Tax – Payable if you want to take a vehicle on a public road.  The rate varies from £0 to over £1,000
  • Council Tax – Payable based on the value of your home.  The rate payable is determined by your local authority

How Much Is My Car Tax?

If you have a car that you use on a public road in the UK, you are obliged by law to buy road tax and to display a tax disc.

In the past, the cost of car tax was the same for everyone.  However, recent changes mean that there are now several different car tax bands depending on the age of your car and on its carbon dioxide (CO2) emissions.  Our guide answers your question ‘how much is my car tax?’

Cost of car tax if your car was registered before 1 March 2001

If your car was registered before 1 March 2001 there are two car tax bands depending on the engine size of your car.

If your engine size is less than 1549 cc you’ll pay £130 for 12 months tax and £71.50 for 6 months.  If it’s over 1549cc you’ll pay £215 for 12 months and £118.25 for 6 months tax.

Cost of car tax if your car was registered on or after 1 March 2001

Car tax rates for vehicles registered on or after 1 March 2001 are split into 13 bands depending on the CO2 emissions of your car.  The lower the CO2 emissions, the lower the car tax that you pay.

You can find out the CO2 emissions of your car by checking your registration certificate (V5C) or by entering the make/model and registration number of your car into the online ‘vehicle enquiry’ section on DVLA’s Electronic Vehicle Licensing website.

The information below shows the costs of car tax depending on your band and whether you want 6 or 12 months tax.

  • Band A (up to 100 g/km) – No car tax payable
  • Band B (101 to 110 g/km) – £20 car tax per year (no 6 month option)
  • Band C (111 to 120 g/km) – £30 car tax per year (no 6 month option)
  • Band D (121 to 130 g/km) – £95 car tax per year or £52.25 for 6 months
  • Band E (131 to 140 g/km) – £115 car tax per year or £63.25 for 6 months
  • Band F (141 to 150 g/km) – £130 car tax per year or £71.50 for 6 months
  • Band G (151 to 165 g/km) – £165 car tax per year or £90.75 for 6 months
  • Band H (166 to 175 g/km) – £190 car tax per year or £104.50 for 6 months
  • Band I (176 to 185 g/km) – £210 car tax per year or £115.50 for 6 months
  • Band J (186 to 200 g/km) – £245 car tax per year or £134.75 for 6 months
  • Band K (201 to 225 g/km) – £260 car tax per year or £143 for 6 months
  • Band L (226 to 255 g/km) – £445 car tax per year or £244.75 for 6 months
  • Band M (over 255 g/km) – £460 car tax per year or £253 for 6 months

Cars first registered after 1 April 2010

Brand new cars registered after 1 April 2010 with CO2 emissions of over 130 g/km attract a different rate of car tax in the first year.  For example, the tax on a brand new car with CO2 emissions of 190 g/km would be £445 in the first year, compared to £245 if the car was several years old.

How Much Is Car Tax?

If you use a vehicle on the roads in the UK then you will have to have a valid tax disc for that vehicle.  Whether you drive a car, van, motorcycle, bus or articulated lorry you will need to have a valid tax disc.

Our guide looks at the cost of road tax for cars from 1 April 2011.

Cars registered before 1 March 2001

If your car was registered before March 2001 there are just two rates of road tax, depending on the engine size of your vehicle:

  • Engine size is under 1549cc you’ll pay £130 for 12 months tax and £71.50 for 6 months
  • Engine size is over 1549cc you’ll pay £215 for 12 months and £118.25 for 6 months

Cars registered after 1 March 2001

Vehicle tax rates for cars registered on or after 1 March 2001 are now split into 13 bands depending on the car’s CO2 emissions.  The amount of road tax you’ll pay depends on which band your car is in. The lower the CO2 emissions from your car, the lower the car tax payable on it.

To find out the CO2 emissions of your car, you can either check your registration certificate (V5C) or enter the model and registration number of your car at the DVLA website.

For cars with CO2 emissions up to 100g/km, no car tax is payable.  There are then 12 further bands and the cost of car tax rises as the CO2 emissions increase.

For example, a standard 2 litre diesel Toyota Corolla registered in 2004 would be in band G with 151g/km CO2 emissions.  You would pay £155 for 12 months tax on this vehicle, or £85.25 for 6 months.

Cars with CO2 emissions under 225 g/km (or cars with higher emissions registered before 23 March 2006) will pay a maximum of £250 for 12 months tax.

Cars with high CO2 emissions pay significantly more road tax under the current scheme.  Cars emitting 226-255 g/km of CO2 pay £425 for 12 months car tax while those emitting over 256 g/km pay £450 every year.

Enhanced car tax for cars first registered after 1 April 2010

Brand new cars registered after 1 April 2010 with CO2 emissions of over 130 g/km attract a higher rate of car tax in the first year.

For example, the tax on a brand new car with CO2 emissions of 210 g/km would be £580 in the first year, compared to £250 if the car was several years old.

Car Tax Basics Everyone Should Know

Every registered vehicle in the UK must be taxed if it is used or kept on a public road. If you don’t tax your vehicle it could be clamped or removed.

Our guide looks at five of the basics of car tax that everyone should know.

What you need to tax your vehicle

In order to tax your car or other vehicle you’ll need several documents.  These are:

  • An MOT certificate (if your car is over three years old)
  • A completed V10 or V11 form
  • Your vehicle’s registration certificate (of the ‘new keeper’ section)
  • A completed application or a Vehicle Registration Certificate (form V62) if you don’t have such as certificate
  • Proof your insurance (at least third party)
  • Payment (unless your vehicle is exempt)

Insurance and MOT

Always make sure that your insurance certificates and MOT certificate are valid on the day you want your tax disc to start.  If you don’t, you will be unable to tax your car.

How to display your tax disc

Your tax disc has to be displayed in the vehicle.  It should be on the passenger side of the vehicle’s windscreen or on the kerb side of the vehicle (for example on a motorcycle).

A tax disc has to be displayed on the vehicle it relates to and cannot be transferred between vehicles.  Your tax disc is valid from the first day of the month you have taxed from and so you shouldn’t display your new tax disc until your old one has expired.

The maximum penalty for failure to display a current tax disc is £200.

Ensuring you don’t pay car tax if you don’t own the car

If you don’t tell the Driver and Vehicle Licensing Agency (DVLA) that you have sold, exported, scrapped or transferred your vehicle you will still be responsible for taxing it.  When you dispose of your vehicle make sure you send the appropriate part of the registration certificate to the DVLA.

Failure to tax your vehicle

If you don’t tax your vehicle (or complete a Statutory Off Road Notification (SORN)) you could be liable for a fine and your vehicle could be seized.

The DVLA carries out roadside checks as well as a computer check each month to identify those vehicles without a valid tax disc.  If you don’t have a valid tax disc you could face an automatic penalty of £80 as well as a minimum fine of £1000. In addition, your vehicle could be clamped, impounded or even crushed.