Why You Should Choose A Car In The Under £25 Tax Bracket

Everyone wants to save money where they can, and when buying a used car it’s probably one of the main factors in your mind. Yet Vehicle Excise Duty (VED), otherwise known as car tax or road tax, is often overlooked.

The amount of car tax you pay can add hundreds of pounds to your running costs each year, so you will want to think about buying a model that is in a low tax bracket. So in this article you’ll find all the information you need to know about tax brackets for used cars – it’ll help you to buy a model that is cheap to tax.

In particular, here we’re focusing on cars in the tax brackets that cost less than £25 per year. Any model built between March 2001 and April 2017 that produces less than 110g/km costs less than £25 a year to tax, and we reckon there’s plenty of choice here when it comes to petrol, diesel or even hybrid options.

Before you buy any used car you’ll need to know your budget, which is usually dictated by your current car. There’s a simple answer to the question ‘how much is my car worth?’ – there are plenty of valuation services available online such as this one linked above, plus there are so many classified car ads that you’ll be able to see models similar to yours and what they are being priced at. The internet really is your friend when it comes to car valuations.

How car tax rules work

Firstly, let’s consider modern car tax. If you buy a new car, or any model built after April 2017, you pay a fixed rate of tax, currently £155 a year (plus an extra £335 if the car costs over £40,000). That means the only way to save on car tax is to buy an electric or hybrid car – the former is free to tax, while the latter saves you £10 a year.

A model built between 1 March 2001 and 31 March 2017 is likely to be the most affordable option, and it’s a great way to save on car tax because there is a lot of variation in how much VED costs for different models – this is because it’s all based on the car’s CO2 emissions.

We think that the cars that sit in the under £25 brackets make a lot of sense. There are two brackets below this threshold: Any car that emits less than 100g/km of CO2 is free to tax and cars that emit between 101-110g/km cost £20 to tax per year. Alternatively-fuelled cars such as hybrids cost £10 less in each tax band, too.

Cheap cars that cost less than £25 per year to tax

Now we know how the tax rules work, let’s look at some of the best low-cost options on the used market. All the cars here, chosen by experts at Parkers, bring both low car tax costs and a cheap purchase price of under £3,000.

Suzuki Alto and Nissan Pixo

The Suzuki Alto and Nissan Pixo are the same car underneath and both are underrated choices – they are surprisingly fun to drive and bring low running costs including cheap tax and insurance.

Toyota Aygo, Citroen C1 and Peugeot 107

The Toyota Aygo, Citroen C1 and Peugeot 107 are all built in the same factory using the same engines, so they all emit low amounts of CO2 and are cheap to tax. They’re all good to drive, comfortable and look stylish, too.

Skoda Fabia 1.6-litre diesel

The Skoda Fabia is a good option if you need a practical car with low tax as it has a big boot and lots of room in the cabin. The diesel engine is punchy and good for motorway trips as well as being really economical.

Fiat 500 1.3-litre diesel

The Fiat 500 is a funky, stylish option that’s available with a low-CO2 diesel engine that keeps it in a low tax bracket. It’s cheap to buy and there are so many around that you’re bound to find one in the colour and spec you love.

Honda Insight

The second-generation Honda Insight costs just £10 a year to tax because it’s a hybrid. This means it’s easy to drive, smooth and very quiet too, plus it returns good fuel economy. The Insight is practical too, though it looks a bit dull.

MINI Hatch 1.6-litre diesel 

The MINI Hatch is a stylish and great-to-drive choice and with a diesel engine under the bonnet, it brings low tax costs. It’s not the most practical option but it’s a lot of fun, running costs are low and it’s comfortable.

Mazda 2 1.6-litre diesel

The Mazda 2 is another option if you want a car that’s great to drive, as it’s a lot of fun from behind the wheel. It’s based on the Ford Fiesta, which means parts are cheap, and the diesel engine is cheap to run and keeps tax costs low.