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Road tax changes: Countdown to new rates for 2017

Published 01 November 2016

In five months' time, from 1 April 2017, all new cars will be taxed against three new VED bands - zero, standard, premium - with taxation calculated on a combination of emissions and the list price of the vehicle. The changes will not impact existing cars on the road.

This means that only cars emitting zero CO2 will pay zero VED, while the majority facing a flat standard rate of £140. Cars with a list price above £40,000 including any extras will pay an additional £310 per year - £450 in total - for the first five years in which the standard rate is paid.

Most family car buyers will pay between £100 - £160 for the first year rate, while the most polluting cars (255g/km+ of CO2) will pay as much as £2000. 

The change came after the former Chancellor of the Exchequer, George Osborne declared that the current VED system was unworkable, with three quarters of all new cars qualifying for zero VED. 

Looking for a tax free car before the new rules come into force? Check out the Sub-100gkm Club

How will the new VED rules affect me?

The current VED bands remain in place for all pre-2017 cars and the new rules will only impact vehicles bought and registered from 1 April 2017. However the rates for the current VED bands will probably rise.

Will electric car owners have to pay road tax? 

No. Electric vehicles will continue to qualify for zero-VED for the foreseeable future.

Tell me about the new VED bands

They're surprisingly simple. 'Zero' emission cars pay nothing, 'Standard' cars pay £140 a year and anything that costs more than £40,000 to buy will cost £140 a year, plus an additional £310 pa for the first five years. There are also new first year rates, spanning from £100 to £2000, depending on how much the car costs to buy and how polluting it is. 

Will owners of expensive cars be worse off?

Some will, given the hike in the first year rate. Buyers of expensive hybrids will also be punished, although the Government claims that 95 per cent of car owners will pay £140 a year. 

How will this impact owners of hybrids or low emission vehicles

If you buy a hybrid or other vehicle with emissions below 100g/km after March 2017 you will have to pay £140 a year in VED. If it costs more than £40,000 to buy then that will come to a total of £450 a year. However, if you already own a hybrid (or buy one before 1 April 2017) you will continue to pay nothing.

Is the government going to make more money out this new system?

They assure us they won't, but we're not so sure because there's a LOT of low emission cars out there that will fall into the £140 a year in VED bracket. There is some good news though, all of the money raised from VED will eventually be used to improve the UK's road structure

What about vans?

VED for commercial vehicles remains unchanged, for now.

And classic cars? 

No change there either. They will continue to pay the standard VED rates for pre-2001 cars.

Comments

Mr. Sensible    on 2 November 2016

Cars of any type even zero emissions do pollute simply by existing. However unless you are actually driving it, it's not going to be a fair system, the new VED rates.
I would say keep current zero tax for the least polluting vehicles and simply 'cane' all diesels particularly school buses i sometimes follow which given the fact they are transporting children is even more shameful, the amount of 'asthma triggering' pollutants they are chucking out!
Add to that, in recent years the truth about misleading economy figures for most diesel cars, and that manufacturers have been aware! A shake up may be due,but yet again the wrong car owners will be targeted.
Theresa May should simply step in and crush Osbornes bill as whilst it may be simple to navigate that does not make it fairer. Newer cars however high polluting, unless diesel, should not be charged more for extras. That's ridiculous.

PW27    on 6 November 2016

The so called VED system has always been a farce. I'm sure it used to be called road tax but they changed it to counteract those complaining that it was obviously not spent on the improvement of our roads, using our misguided health and environmental concerns as a clever emotive tug ..... diesels, need we say more about that con.
I believe they spent a lot of the money on so called traffic calming measures (and now, variable speed limit cameras on the motorways?) instead of potholes, which in itself creates greater emissions. As also said before, if the car isn't driven much, the emissions will be less. When therefore, is a politician with a spine going to scrap it altogether and increase the fuel tax to compensate, as, 'pay as you go' is the only fair way. This would also stop the ridiculous penalisation of more expensive cars, including a Tesla for example. I'm sure that the motor industry is overjoyed that their billions invested in reducing emissions has been wasted. Perhaps there should also be an emissions penalty for road works not completed fast enough and those who are confirmed as causing a road accident which results in major conjestion.

Graham567    on 15 November 2016

Why are they driving on the right in the photo?.Can't they even use a British photograph!.

   on 18 November 2016

Just another way to screw the motorist

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