Vehicle Excise Duty rule means drivers can avoid paying road tax

Vehicle Excise Duty (VED) – more commonly known as road tax – is a tax on car ownership and use. It is partly based on CO2 emissions and is intended to encourage motorists to choose efficient cars that do not pollute as much.

Fully electric car owners are exempt from paying VED as they are “zero-rated”.

As of now, this only applies to cars with no combustion engines at all.

However, drivers who opt-in for hybrid cars can also avoid paying the charge with a clever trick.

The current VED law came into force on April 1, 2017, and seemed to target hybrid car owners the most.

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All electric cars are now exempt from all VED costs, no matter their original list price.

All cars have an initial road-tax cost that can go all the way up to £2,365 for the most polluting models.

After April 1, 2017, non-hybrid petrol and diesel cars costing less than £40,000 are subject to a flat VED rate of £165 a year from the second time the vehicle is taxed.

Hybrid and plug-in hybrid models (and even mild hybrids) are classed as “Alternative Fuel Cars” and get a £10 discount on that rate, which means the annual fee for those models is £155 (for sub-£40,000 cars).

If a car costs more than £40,000 when new, then drivers have to pay an extra £355 a year, but only for the first five times it is taxed.

That means an annual fee of £520 for conventionally fuelled vehicles and £510 for hybrids (including plug-ins).

Pure-electric vehicles are currently “zero-rated” for road tax – no matter their original list price.

Motorists should note that this means the cost of road tax is zero, not that they don’t have to tax their car.

They still need to go online or phone the DVLA to tax their car, even though it costs £0.