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How to slash your vehicle tax bill

Model car on coin pilesFuel and motor insurance costs may be drivers’ biggest annoyance right now, but pick the right car and you can keep your motoring costs down.

With the price of fuel and insurance soaring over recent months, it’s understandable that the cost of road tax might be overlooked by many motorists.

But vehicle excise duty (VED), as it's correctly known, can set car owners back hundreds of pounds a year. This is particularly true if your vehicle emits a higher level of greenhouse gases than other models.

That’s why we’ve put together a list of just some of the cars that will ensure you pay little or nothing to the Exchequer in road tax.

The burden of showroom tax

The last Labour government introduced a new way of charging road tax that put a greater burden on the most polluting cars, especially if they were bought new.

Such vehicles can now pay as much as £1,000 tax in the first year – hence the name “showroom tax” – and up to £460 standard vehicle excise duty in subsequent years.

The highest rates are charged on models which emit 256g or more of carbon per kilometre driven, which are grouped in road tax band M. These include Mazda’s RX-8 R3, as well as a number of SUVs and sports cars.

Don’t get the model wrong

But it’s not just sporty models that incur the highest tax costs. Website Road Tax Prices points out that there can be significant differences in vehicle excise duty between versions of what appear to be the same car.

For example, the Vauxhall Insignia ecoFLEX, a two-litre diesel, is in band E. Its showroom tax is £115, the same rate as its subsequent annual road tax, so the total tax cost over three years would be £345, ignoring any future inflation-linked rises.

The gas-guzzling Vauxhall Insignia V6 4x4, on the other hand, finds itself in band M. That means £1,000 first-year showroom tax, and £460 thereafter, a total of £1,920 over three years.

Low-tax alternatives

Given the huge differences in tax treatment of different models of car, it’s no surprise that there is a now a much wider choice of low-tax or no-tax cars available than when vehicle excise duty charges were first linked to emissions in 2005.

This means motorists are much less likely to have to compromise on performance or style of car if they want to cut their tax bills.

Here are a few of your options if you are looking for a vehicle which will cost nothing (band A) or just £20 a year (band B) in road tax.

Band A: Tax-free

  • Volvo V50 1.6D DRIVe SE Lux Start/Stop 

    This diesel estate does an impressive 74 miles per gallon, and emits just 99g of carbon per kilometre, putting it in tax-free band A. New, it costs £22,000.

  • Fiat 500 0.9 TwinAir Pop Auto

    A low-emission petrol engine (92g/km) means this is a tax-free option if you’re looking for a small runabout. From £10,865.

  • Volkswagen Golf 1.6 TDI (105 bhp) BlueMotion 5d

    Winner of various awards, this diesel version of the ever-popular Golf has emissions of 99g/km, plus efficiency of 74mpg. From £19,430.

  • Hyundai i10 1.0 Blue 5d 

    At the budget end of the market, this Hyundai will set you back just over £9,000, and there will be no road tax to pay with emissions of 99g/km. Runs on petrol.

Band B: £20 tax

  • Audi A3 1.6 TDI Sport 

    With 109g/km, this sporty diesel is in VED band B, which means no showroom tax (so no tax at all in the first year) and then £20 a year after that. Costs £20,780.

  • Ford Fiesta 1.6 TDCi Zetec S 

    Another diesel in band B with emissions of 107g/km, this version of Ford’s classic will cost £14,895.

To check what tax band your motor falls under visit the Directgov website.




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Chris Torney

Chris Torney

Chris is personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris



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