CHANGES TO VEHICLE EXCISE DUTY FROM APRIL 2017

As of 1st April 2017, existing rates for Vehicle Excise Duty (VED) will be changed. Also known as road tax or car tax, the changes to VED will affect car buyers purchasing a new car from 1st April 2017 onwards.

Announced in Summer 2015 by then-Chancellor George Osborne, the Vehicle Excise Duty changes will result in alterations to all current road tax bands, which are dependent on the CO2 emissions of the car being purchased.

What are the main VED changes I need to be aware of?

Any car registered on or after 1st April 2017 will be classified under the new VED bands, for both first year and Standard Rates, which will be  dependent on the CO2 emissions of the vehicle. An annual Standard Rate of £140 applies to all petrol/diesel cars, regardless of their emissions, after the first year. The annual Standard Rate will be £0 for vehicles with zero emissions.

 

Are there any extra payments for certain vehicles?

Cars with a list price* above £40,000 will attract a supplement of £310 for each of the 5 years which follow the First Year (i.e. the initial 12 month period following the date of first registration). The extra payment also applies to zero-emissions vehicles. After the initial 5-year period, the Standard Rate is then enforced.

 

Do these changes apply to cars registered before 1st April 2017?

Road tax changes will not be applied retrospectively, meaning the changes won’t affect any vehicles registered before 1st April 2017. For these vehicles, the current road tax bands will remain the same. The VED changes will only apply to new cars registered on or after 1st April 2017.

 

*List price includes base vehicle, trim, paint, options, delivery and VAT.

The tables below show the current VED rates effective until 31st March 2017 and the revised VED rates effective from 1st April 2017

CURRENT VED RATES

For petrol and diesel cars registered on or before 31st March 2017

NEW VED RATES

For petrol and diesel cars registered from 1st April 2017

WHY IS VED CHANGING?

Pre 1st April 2017, VED rates were introduced in 2001 when the average new car emission was 178g CO2/km. This formed a band system based on CO2 emissions, with the Band A threshold of 100g CO2/km or below being introduced in 2003. With Band A vehicles incurring no charge, and average new car emissions having fallen to 125g CO2/km in order to meet EU emissions targets, an increasing number of vehicles began to fall into the zero-or-lower-rated VED bands. This resulted in what the government calls “a sustainability challenge”, weakening the environmental credentials of VED.

 

With auto manufacturers like DS producing more cars that meet future EU targets of 95g CO2/km by 2020, the trend looked set to continue, resulting in a much lower road tax being paid each year accumulatively. The pre-April 2017 system also results in a level of unfairness due to owners of newer cars paying little or no VED, while owners of older cars were generally left paying much higher rates.

 

The reformed VED system from 1st April 2017 retains and strengthens the CO2-based First Year Rates in an effort to incentivise motorists to select greener cars. This is good news for the environment, and also results in a flat Standard Rate which makes the tax fairer, simpler and more sustainable for all vehicle owners.

 

In addition to the Standard Rate, a supplement of £310 for cars with a list price* (not including VED) over £40,000 has been introduced. This applies for each of the 5 years that follow the First Year (i.e. the initial 12 month period following the date of first registration) for all cars, including those with zero emissions. This is designed to ensure that those who can afford the most expensive cars are making a fairer contribution.

 

*List price includes base vehicle, trim, paint, options, delivery and VAT