Changes to new car road tax from 2017 explained

New changes start from 1 April 2017 and apply to new cars purchased after this date

 
A new road tax system is being introduced in the UK from 1 April 2017, for all new vehicles registered after this date.

Vehicle Excise Duty (VED) will apply to all new cars registered after 1 April 2017, so if you’re thinking of buying a new car, now’s the time, as new cars registered before 1 April 2017 remain under the current system, so you could save yourself a few pounds.

The new tax system will consist of three specific VED bands: zero, standard and premium. Tax under the new system will be calculated based on the car’s carbon dioxide emissions and the list price of your new vehicle. Basically, the higher the emissions, the more tax you will have to pay.

New changes start from 1 April 2017 and apply to new cars purchased after this date

Changes to new car road tax from 1 April 2017 in the UK © Copyright Blane Chalmers and licensed for reuse under this Creative Commons Licence

 

Zero-emission cars will pay no VED at all. The average ‘standard’ family car owner will pay £140 per year but if the car costs you more than £40,000 to purchase, an extra £310 per year will have to be paid on top of the £140 for the first five years no matter what the emission levels are, so a grand total of £450 per annum. Depending on the polluting level and the cost of the vehicle, new first year rates could vary from £100 to a staggering £2,000.

Under the new system, the average family car will cost around £100-£160 per first year to tax, whereas motorists taxing the most polluting cars with emissions of more than 255g/km, could be faced with charges as high as £2,000.

The new changes are being introduced by the government to bring fairness to the tax system. It’s estimated that 75% of all new cars will qualify for zero-emission VED and owners of electric vehicles will continue to be exempt from VED.

The current system remains the same for all pre-2017 cars. The new rules will only apply to cars registered after 1 April 2017 but the rates for the current VED bands may rise as a result of the system change.

There will be no VED changes for commercial vehicles, or for owners of classic cars, as they will continue to pay the pre-2001 VED rates.

The first year rate could leave owners of expensive cars worse off and those purchasing a new expensive hybrid also. However, according to the government, 95% of car owners will only be paying around £140 per annum.

If you own a hybrid, or another type of low emission vehicle less than 100g/km already, then you will continue to pay zero-VED. However, if you purchase either of these after 1 April 2017, you will have to pay £140 VED per year and if the vehicle cost more than £40,000, the price will rise to £450 per year for the first five years.

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