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IF YOU are looking to purchase or lease a new vehicle this year, depending on its emissions value and cost, it might be prudent to do so soon or you face the possibility of being hit by significantly higher Vehicle Excise Duty (that’s road tax to most of us).

Currently, depending on the CO2 emissions of your vehicle, the first year rate of Vehicle Excise Duty (VED) for new vehicles costs between £0 (for VED band A vehicles emitting up to 100g/km) to £1120 (for VED band M vehicles emitting over 255 g/km). Thereafter, the standard rate of VED is applied, costing anything from £0 (for vehicles emitting up to 0g/km) to £450 (for vehicles emitting over 255 g/km).


• VED bands and rates for new cars from April 2017

However, from 1st April 2017 all this is changing as the Government introduces measures that were announced by the Chancellor in his 2015 budget. Out go the existing rules for newly registered vehicles and in come a set that will see the majority of vehicles subject to a standard rate of £140 annually. Many observers believe these changes are being brought into force due to car manufacturers producing lower polluting vehicles, meaning the Government is making less tax revenue on VED under the present rules.

Whilst some vehicle owners will be quids-in under the new regulations – for instance vehicles with a list price under £40,000 with zero emissions will not pay a penny in VED –  many will see an increase in the cost of taxing their new ride. And even motorists who purchase 100 per cent electric cars could find they are paying more than they do with their current vehicle, if the new model costs over £40,000, as they will pay an ‘additional rate’ of £310 per annum for five years.

So what this will mean for car buyers?

• Rates for pre-April 2017 vehicles unchanged

  • Tax rates for vehicles registered before 1st April 2017 will not be affected by this change.
  • If a consumer buys a new vehicle registered on or after 1st April 2017, after the first licence the majority of vehicles move to the standard rate of vehicle tax which is £140 a year.
  • If the vehicle list price was over £40,000 at first registration, the consumer will pay £450 a year, after the first vehicle licence. This is made up of the £140 standard rate and £310 additional rate. After five years the vehicle tax will revert to the standard rate of £140 per year.
  • Vehicles with a list price exceeding £40,000 with zero emissions (including electric) will pay the additional rate of £310 a year for a 5 year period, after the first licence. After the 5 year period these vehicles will pay zero vehicle tax.
  • Alternative fuel vehicles will continue to receive a £10 reduction on vehicle tax rates.

For more information visit: Vehicle tax rate tables

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PHC Magazine

PHC Magazine