With a brand-new system of Vehicle Excise Duty due in 2017, we explain how the next car you buy can save you money if you act quickly.
New road-tax rules come into effect on 1 April 2017 with far-reaching effects for the UK new car market especially.
The way that vehicle Excise Duty (VED) or road tax as it’s sometimes called - is calculated hasn’t changed significantly in over a decade and the new legislation reflects how the cars on our roads are expected to develop in the future. A far greater emphasis is being placed on encouraging sales of zero-emissions cars, so merely low-emissions cars will no longer be exempt from VED.
Any cars already registered before 1 April will continue to be taxed under the existing VED system – only cars registered on or after that date will be affected by the changes. Read on for a reminder of how the road tax for your car is calculated – even if it’s a little older or even a classic car.
Other motoring taxes will continue to operate separately, company-car drivers, for example will continue to pay a special tax called Benefit-in-Kind (BiK). The calculations for this are based on the car’s CO2 emissions and its purchase cost. We’ve explained the company-car tax system in depth in a separate guide. Meanwhile, tax on fuel will continue to be set independently by the Treasury.
If you’re a private motorist looking to buy a new car in the coming months, it’s especially important to be properly informed before making your decision. The new VED system is likely to have a big effect on how much your car costs to buy, as well as how much it’ll cost you to run every year.
This comprehensive guide explains all the changes in VED for 2017, and will show you how much your car will cost to tax, no matter how new or old it is.
If your present car was registered before 1st April 17, your road tax won’t change; it’ll still fit into one of two bands based on engine size, making it easy to work out your annual bill.
If your car has an engine less than 1,549cc in capacity, it’s liable for annual VED of £145. Larger engines attract a VED bill of £230. If you’re not worried about driving an older car, those with an engine smaller than 1.6 litres will be a lot less costly to run.
If you have your sights set on an older car with more power, even exotic
sports cars or big SUVs cost no more than £230 to tax if registered
before 1 April 17 – while an example of the same car registered after
then could easily cost twice as much to tax.
As of 1 April 2017, all cars over 40 years old are considered to be classic vehicles and aren’t liable for VED payments at all.
New tax bands come into force on 1 April 2017 and only affect cars registered after that date. (Any vehicle on the road or registered before then continues to be liable for VED at the current rates.)
The table shows each band of the new system, with its corresponding CO2 emissions figures and the amount liable in the first year after purchase and subsequently. It’s also worth noting cars costing more than £40,000 to buy are subject to additional taxation.
Most zero-emissions cars will remain tax-exempt, but many of those cars presently seen as low-polluting aren’t treated anywhere near as favourably by the new system. In real terms, this will put up the cost of motoring for many, as lots of the more affordable cars on the market will be liable for greater yearly tax bills.
Many models that enjoy a low emissions-related tax rating today – some of which are completely exempt – will be liable for payments of at least £140 a year. The tax advantages of many hybrid cars will be reduced, with only true zero-emissions cars being excused from VED altogether – and even then only if they cost less than £40,000 to buy.
Buyers of small family hatchbacks will be no less affected. If you buy and register a car that emits between 101 and 110g/km of CO2 before 1 April 2017, it’ll only cost £20 a year in VED. However, the same car registered on or after 1 April 2017 will cost £140 a year from its first birthday onwards.
Increased overall costs will also be faced by buyers of more polluting cars, although you could actually stand to benefit in the years after the increased initial registration fee is taken into account. For example, a car that emits between 226 and 255g/km of CO2 is presently liable for an initial registration fee of £885 and yearly tax payments of £500 a year. The new system sees the initial registration charge soar to £1,700, but the yearly payment drop to £140.
*All cars must be registered before 01.04.17 for the tax savings to apply.
*Updated 1st Feb 17