10 best cars with low road tax

Wondering how to minimise your road tax bill? We’ve got 10 great cars for you

Tax is as much a fact of life as breathing, but while the UK’s road-tax system is rather complicated, if you’re armed with the right information you can reduce your tax obligations when choosing your next car.

For new cars, the first year of road tax is based on a car’s carbon dioxide (CO2) emissions, while after that a flat rate of £180 is applied, with a £10 discount for hybrid cars, and a £390 surcharge running from years two to six of the life of cars costing £40,000 or more. Electric cars are exempt from the first year of road tax, all subsequent years and the £40,000 surcharge, though that from 2025 EVs will attract road tax.

As such, there are three ways to get a car with cheap road tax, or even avoid road tax altogether: choose a hybrid car, one costing under £40,000, or opt for an EV.

This guide will detail 10 cars from those three categories:

1. MG 4
2. Tesla Model 3
3. Kia Niro EV
4. Volkswagen Golf eHybrid
5. Citroen C5 Aircross PHEV
6. Ford Kuga PHEV
7. Peugeot 308 Hybrid 180
8. Audi TT S line
9. BMW 3 Series 320i
10. Skoda Octavia vRS Estate

Low road tax cars: electric cars

1. MG 4

Emissions: 0 g/km
Fuel: Electric
First-year tax rate: £0
Following yearly tax rate: £0
List price from*: £26,995
*All prices correct as of April ‘23

It’s hard to overstate what a relative bargain the MG 4 is. Not only does it look good, offer decent practicality and come with all the equipment you’re likely to need, but it also has a decent range between charges, and is genuinely rewarding and enjoyable to drive.

In fact, we liked the MG 4 so much we named it carwow Car of the Year for 2023. Opting for the Long Range model is probably worth it, as for an extra £2,500 or so a larger battery pushes the range from an official 218 miles to 281 miles.

2. Tesla Model 3

Emissions: 0 g/km
Fuel: Electric
First-year tax rate: £0
Following yearly tax rate: £0
List price from: £42,990

The Model 3 may be a little more expensive than the MG 4, but even though it pushes through the £40,000 price point it doesn’t attract the ‘luxury’ car tax, thanks to being electric.

Why should you consider spending an extra £18,000 on the Tesla rather than the MG? Well, the Model 3 has a usefully longer range, for one thing, with even the standard car covering an official 305 miles on a single charge, and the Long Range version pushing that figure to 374 miles – though you’ll need an extra £8,000 to get that version.

Add in Tesla’s excellent driver assistance tech, and an interior that will appeal to fans of minimalism, and the fact the Model 3 is exempt from road tax is the icing on the cake.

3. Kia Niro EV

Emissions: 0 g/km
Fuel: Electric
First-year tax rate: £0
Following yearly tax rate: £0
List price from: £37,295

With a starting price that’s in between the Model 3’s and the MG 4’s, the Niro EV may not be quite as fun to drive as the MG, and doesn’t offer the same level of performance as the Tesla, but it makes up for this by being supremely comfortable and easy to live with.

Equipment levels are generous throughout the range, with even the base Niro EV coming with full smartphone integration, twin 10.25-inch infotainment and driver information screens, plus a reversing camera and adaptive cruise control, which will match your speed to the car in front’s. All that, plus Kia’s seven-year/100,000-mile warranty makes the Niro EV an easy car to recommend.

Oh, and if you like the idea of a Niro but don’t want a full EV, there are also plug-in hybrid and conventional self-charging hybrid versions, both of which are a) under £40,000, b) get a £10 discount on the flat annual rate, and c) occupy a relatively low first-year road-tax band.

Low road tax cars: plug-in hybrids

If an electric car isn’t right for you, choosing a plug-in hybrid (PHEV) can save you from having to pay any road tax for the first year of the car’s life, while also saving you £10 a month each subsequent year. Finding a PHEV that costs less than £40,000 can be a challenge, though (only EVs are exempt from the luxury supplement), but we’ve done the hard work for you here.

4. Volkswagen Golf eHybrid

Emissions: 21 g/km
Fuel: petrol-electric plug-in hybrid
First-year tax rate: £0
Following yearly tax rate: £170
List price from: £36,660

The plug-in hybrid version of the Golf does everything the standard Golf does well, offering a driving experience that expertly blends handling and refinement, together with strong build quality and a classy image.

Thanks to a sub-£40,000 asking price and CO2 emissions of under 51 grams per kilometre the eHybrid Golf also attracts as low a road tax bill as it’s possible for a non-EV to get, with a £0 tariff for the first year, and a £170 annual one after that. The electric range of 42 miles means most commuters will be able to get to and from work without burning a drop of petrol, too.

5. Citroen C5 Aircross Plug-in Hybrid

Emissions: 29 g/km
Fuel: petrol-electric plug-in hybrid
First-year tax rate: £0
Following yearly tax rate: £170
List price from: £35,935

In a market dominated by sporty SUVs with stiff suspension, the C5 Aircross likes to do things differently, offering a comfort-focussed ride that absorbs bumps beautifully, something that seems to become more important by the year given the pandemic of potholes many roads seem to be suffering from of late.

The C5 Aircross is about more than just comfort, though, with the plug-in hybrid version offering a decent 40 miles of range in battery mode, the interior being neatly designed, and the boot being a generous size. Plus the relatively low price means you could realistically get one on your driveway for £400 if you can put down a deposit of a little over £8,000.

6. Ford Kuga PHEV

Emissions: 23 g/km
Fuel: petrol-electric plug-in hybrid
First-year tax rate: £0
Following yearly tax rate: £170
List price from: £37,755

The plug-in hybrid version of the Ford Kuga isn’t much more expensive than the C5 Aircross, but while the Citroen prioritises comfort, the Kuga offers a more dynamic and involving driving experience.

That’s not to say it’s uncomfortable, as Ford has tuned its suspension to absorb bumps in the road pretty well, but it manages to blend this with handling that makes winding roads a pleasure to encounter. A 35-mile electric range is decent, too.

7. Peugeot 308 Hybrid 180

Emissions: 23 g/km
Fuel: petrol-electric plug-in hybrid
First-year tax rate: £0
Following yearly tax rate: £170
List price from: £36,900

Yes, it’s a cliche to say it, but the French Peugeot 308 really does offer a nice dose of style in a market that can sometimes seem a little homogenous, with that eye-catching front radiator grille going hand-in-hand with some really striking paint options, including the intriguingly named Vertigo Blue and Olivine Green.

Looks aside, the 308 is a comfortable car with a classy interior, while refinement on the motorway is fantastic, and the plug-in hybrid version can cover up to 37 miles between charges.

Sub £40,000 cars

It may be that you’re after neither a plug-in hybrid nor an electric car, in which case the magic number to keep an eye on is £40,000, after which a hefty £390 annual surcharge kicks in for years two to six of the car’s life.

Do note that £40k figure is the car’s total price from new, including options, so we’ve selected specific trim levels that ensure these three cars stick under that figure. We’ve also stuck to cars with reasonably low emissions because when cars that emit a lot of CO2 get as much as £2,605 added their purchase price when new, such matters are not trifling.

8. Audi TT S line 40

Emissions: 154 g/km
Fuel: petrol
First-year tax rate: £645
Following yearly tax rate: £180
List price from: £36,365

The Audi TT might not be the first car that springs to mind when thinking about cars that attract low road tax, and sure, its £645 first-year bill could certainly be lower. But when you look at what you get for your money, the TT is proof that fun doesn’t have to be ruinously expensive.

What exactly do you get for your money? Well, a great-looking, sharp-handling two-door coupe for starters, while if you go for the S line model above the entry-level Sport you also get Alcantara (synthetic suede) and leather seats plus Audi’s Virtual Cockpit digital driver’s display. We’d recommend adding the £1,495 Comfort and Sound Pack which will keep you under £40k, while seeing a Bang & Olufsen stereo and reversing camera fitted, amongst other goodies.

9. BMW 3 Series 320i

Emissions: 145 g/km
Fuel: petrol
First-year tax rate: £255
Following yearly tax rate: £170
List price from: £39,605

You can only just squeeze into a BMW 3 Series for under £40,000, and you won’t be able to upgrade to M Sport, or the frugal 320d diesel model, but don’t be thinking a Sport 320i will leave you feeling hard done by.

Because even an entry-level 3 Series is a fantastic car to drive, with a beautifully balanced chassis that’s as rewarding on a B road as it is refined on the motorway. The 3 Series also has a fantastic interior, though do be warned you’ll have to be happy with it in Alpine White, as the other paint options are £695, which will tip the car past £40,000, and bring you that punchy £390 annual supplement from the taxman.

10. Skoda Octavia vRS Estate

Emissions: 159 g/km
Fuel: petrol
First-year tax rate: £645
Following yearly tax rate: £170
List price from: £36,105

Yes, we agree, that first-year tax bill is pretty punchy, but that is for the spicy 245hp vRS version of the Skoda Octavia Estate (our embedded video review is of the non-vRS Octy Estate). If you want to lower your first-year obligation the sensible 110hp 1.0-litre TSI or 115hp 2.0-litre diesel engines bring that bill down to just £210, and knock £8,000 and £11,000 of the Octavia’s price respectively.

But the Octavia Estate is a sensible enough car already, we’d say, so why not jazz things up a little with the sporty vRS model? You’ll even be able to add some choice options while keeping the price under £40k. All that while getting a fantastically practical and nicely engineered car.

How is road tax calculated?

As set out above, the first year of road tax, which applies to brand-new cars, is based on a vehicle’s carbon dioxide emissions and ranges from £0 for an electric car or plug-in hybrid that emits under 51g/km of CO2, to £2,605 for a car emitting 255g/km or more.

After that, you’ve got a flat annual rate of £180, with a £10 discount for hybrids, and a £390 supplement that runs alongside the flat rate from years two to six of the car’s life (IE after the CO2-dependent first year) if the car costs £40,000 or more when new.

Also note that inflation often sees all of those rates increase with new Budgets, with the 2023 Spring Statement pushing the standard annual rate up from £165 to the current £180 mark, and the £40k supplement rising from £355 to the £390 it stands at today.

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