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Vehicle excise duty changes 2017

Matthew Grief

Thinking of buying a new car? Be aware of changes from 1 April 2017!

Road tax is set to increase significantly after the end of March so if you’re thinking about buying a new car this year, you may be better off doing so before 1st April.

New road tax bands affect anyone buying a new car from 1st April 2017 onwards. The changes, announced by the Chancellor in the 2015 budget, mean the vehicle licence will be calculated on the vehicle’s CO2 emissions in the first year of registration, reverting to a flat rate of £140 for most cars thereafter.

Currently low-emission petrol and diesel cars are tax exempt. However, from April, only vehicles with zero tailpipe emissions (i.e. electric and hydrogen cars only) will be exempt from road tax.   Plug-in hybrid models that use a conventional combustion engine will no longer be exempt.

In addition, anyone purchasing a vehicle with a list price of more than £40,000 will also have to pay an additional rate of £310 per year on top of the standard rate for 5 years from the end of the first vehicle licence.  After the 5 year period the standard rate will apply.  So, even if you are purchasing a zero emission vehicle, if the list price is over £40k you will need to pay the additional rate of £310 until the 5 year period is up after which time zero vehicle tax will be payable. 

The changes do not apply retrospectively.  Only new cars bought after April 2017 will be taxed under the new system. Tax rates for vehicles registered before 1st April 2017 are not affected by the changes.  
Under the current VED scheme most new cars are paying little or no tax (around a quarter of new cars don’t pay any road tax at all) – costing the Treasury millions.  The changes mean that fewer cars will be exempt from VED tax and most cars will cost more to tax than they did previously.  

CO2 emissions (g/km)
One-off first year tax charge Standard annual rate (year 2 onwards) Standard annual rate (year 2 onwards) for cars costing >£40,000 payable for 5 years
0 £0 £0 £310
1-50 £10 £140 £450
51-75 £25 £140 £450
76-90 £100 £140 £450
91-100 £120 £140 £450
101-110 £140 £140 £450
111-130 £160 £140 £450
131-150 £200 £140 £450
151-170 £500 £140 £450
171-190 £800 £140 £450
191-225 £1200 £140 £450
226-255 £1700 £140 £450
Over 255 £2000 £140 £450