If you are thinking of buying a new car, there are some important changes to car tax, effective 1st April 2017, that we think you should know about...
The government changes to VED (Vehicle Excise Duty) – which is more commonly known as car tax – will be coming into force April this year, so if you’re looking to buy a new car the FAQ below could help save you a pretty penny.
We’ve put together the most frequently asked questions, with the information we have received to date, so you know what to expect when the change comes into effect:
Currently the amount of car tax we pay depends on what VED tax band a vehicle falls into, with each band being defined by CO2 emission levels. As a result, people who own low emission vehicles pay less tax, or no tax for some vehicles, but those who drive high emission vehicles pay more.
However, in the 2015 Summer Budget the government announced an overhaul of the car tax system meaning that only hydrogen and electric cars will be exempt from paying car tax. All other cars will be charged a one-off first year payment, moving to an annual standard flat rate of £140 from year two. Statistics show the standard rate will affect an estimated 95% of new car owners.
In addition to the flat rate payment, cars that cost over £40,000 will be required to pay an additional £310 for the first five years, totalling £450 per year.
The changes will take effect for new cars bought on or after April 1st 2017. So, for example, those who take delivery of a new car in March, will not be charged under the new rates. You should therefore bear in mind the timings of these changes if you’re looking to buy a brand new car this year.
No. The existing VED rules will only apply to cars registered on or after April 1st and therefore will not affect the tax rate for your existing car.
Ultimately, all buyers of newly registered cars after this date will be affected in some way unless you purchase a zero emissions car under £40,000. It is important to note that, although zero emissions vehicles will still have a £0 standard rate, owners of zero emission vehicles valued at over £40,000 will be required to pay an additional rate of £310 per year for the first five years only.
The biggest impact will therefore be on buyers of cars with below 100 g/km of CO2 emissions who would ordinarily pay very little or no tax at all. These low-emission petrol, diesel and hybrid cars are currently exempt from VED. Calculations suggest that these drivers could pay up to nearly nine times the amount that they currently pay.
Conversely, buyers of cars with high CO2 emissions will be the biggest savers in the long term thanks to the new rules, despite a higher first year rate.
The following table breaks down the costs for the new VED tax bands from April 2017:
CO2 Emissions (g/km)
First year rate
Cars valued at £40,000 or more pay a £310 yearly supplement for five years
For more information, we’ve included some useful links below so you can get fully up to speed with the changes to VED: