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Jamie Gibbs

7 of the best tax-exempt cars you can buy


Eco-friendly cars have become increasingly desirable among UK drivers, thanks to their reduced environmental impact, lower running costs and status as free from vehicle tax.

Car driving on a country road

Annual vehicle tax, or Vehicle Excise Duty (VED) to give it its official name, can be a major part of a car’s running costs. The rate of tax you pay is determined by the CO2 emissions a car emits – the lower the CO2 emissions, the less you have to pay.

If the CO2 is low enough – 100g/km or less for cars registered before Arpil 2017 – you can even renew the VED for free each year.

With this in mind, more and more people are opting for eco-friendly vehicles, such as electric, hybrid and low-emission diesel or petrol cars.

While many drivers still associate environmentally-friendly cars with city-faring superminis, our list of tax-exempt vehicles are spacious, good to drive, and offer enough grunt to make you feel comfortable on the motorway.

The tax figures here are based on cars registered before April 2017. For tax brackets on newer models, check out our guide.

1. BMW i3

BMW i3

First in our list is a car that’s highly respected for its excellent driving experience, nimble road handling, style and economy. The futuristic-looking i3 was first introduced in 2014 and it quickly became one of BMW’s most admired models.

It’s a capable five-door hatchback with enough room to fit four passengers with ease. Plus it comes with plenty of features, such as Driver Assistance Systems which include adaptive cruise control, collision alert, and heavy traffic assistance.

Performance-wise, it pulls well on the motorway and around the city, and you won’t feel like you’ve made a compromise for going electric-only.

2. Audi A1 Sportback - 1.6 TDI SE

Audi A1 Sportback

Another German-made motor, the Audi A1 Sportback is a roomy, fun-to-drive car that offers superb quality and a responsive engine that doesn’t disappoint. Compared to the original A1, the Sportback alteration is a five-door version of that model, which delivers more head and leg room.

If you’ve driven an Audi before, you’ll find the interior familiar. It features a clean layout, modern materials and a general youthful character.

The Audi A1 Sportback might require a significant initial investment when buying outright, but it will save you pounds in the long run due to its economic engine.

3. Nissan Qashqai - 1.5 dCI Visia

Nissan Qashqai

The diesel version (1.5 dCi Visia) of the ever popular Qashqai can just about qualify for tax-free driving with its 99g/km of CO2. The sport utility vehicle (SUV) offers the perfect blend of a spacious comfortable cabin and the characteristics of a hatchback.

It’s still a highly sought-after car, mainly due the efficient, yet powerful engine, agile suspension and little to no body lean when cornering. It’s also a safety champion with a full five-star rating awarded by Euro NCAP.

All this makes the Nissan a really fun, worry-free car to drive. It simply ticks all the right boxes.

4. Citroën C4 Cactus - 1.6 BlueHDi

Citroen C4 Cactus

Feel Citroen’s SUV delivers a distinctive and stylish look and its head-turning exterior blends well with its simple, well-refined interior. Performance wise, the engine delivers enough grunt to picks up pace well, particularly at motorway speeds.

Unlike the Qashqai, the C4 holds a four-star safety rating, but don’t let this put you off. Citroen’s SUV does well in the costs department, its roomy enough in the cabin (with a 358-litre boot), and delivers a sporty feel when behind the wheel.

All this makes it a really tempting choice, especially as it only emits 92g/km of CO2.

5. Peugeot 308 - 1.6-litre e-HDI diesel

Peugeot 308

The 308 is a fantastic family hatchback which delivers excellent fuel efficiency and low CO2 emissions. While the car’s exterior isn’t exactly revolutionary, the Peugeot benefits from a spacious interior, plentiful features and a brisk engine under the bonnet.

Driving or simply being in one is a pleasure due to the smooth road handling, agile engine performance and well-isolated wind and road noise. It’s an overall pleasing car to own, but if you think it’s not for you, it’s worth checking out the Volkswagen Golf and Ford Focus.

6. Volvo XC90 - 2.0 T8 Twin Engine Hybrid

Volvo XC90

The XC90 is Volvo’s premium SUV which was first launched in 2002. It’s a practical, well-built family car which holds its value well, if depreciation is important to you. Without a doubt the strong, muscular exterior makes it an appealing purchase. But this SUV isn’t just about the looks.

Passengers benefit from a roomy cabin, elevated seats and a classy interior which is on par with the costly BMW X5. The Volvo is perfect for both long commutes (the diesel version is particularly quiet) and for conquering the urban streets.

The XC90’s engine (2.0 T8 Twin Engine Hybrid) delivers a grippy performance with agile road handling, although it’s not quite as nimble as the Qashqai. Nevertheless, it makes a great car for a big family and also looks good for business.

7. Toyota Yaris - Hybrid 1.5 VVT-i

Toyota Yaris

The hybrid version of the Yaris (Hybrid 1.5 VVT-i) is the most eco-friendly, non-electric car currently on the market. However, that comes at a price, as it’s not one of the best performing motors. If you commute long distances, you’ll find it difficult to keep up with other cars on the road.

On the flip side, it is perfect for driving around town and, on shorter distances, it’s hard to beat. The Yaris is also one of the safest cars on market with a five-start Euro NCAP rating.

An area where the car isn’t lacking is the interior: the cabin benefits from a touch-screen control system, a reversing camera, Bluetooth connectivity and air-con. If you’re looking for something similar, check out Ford’s Fiesta.


If you’re looking to buy one of these, or any other sub-100g/km-of-CO2 car, remember that you still need to apply for vehicle tax each year.

The list above shows that economical cars don’t have to compromise on looks and performance, and investing in one could make sense.


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