What every driver needs to know about the 2017 VED car tax changes

Car tax

Did you know that the car tax regulations will change in April, 2017? Big alterations are afoot after the government calculated that increasingly fuel efficient cars are leaving it out of pocket.

That’s because currently, the annual tax drivers pay to be on the road is calculated according to how much carbon dioxide (CO2) comes out of their car’s exhaust. And around 25 per cent of all new cars are so clean that, guess what? They’re exempt from road tax.

But from next April anybody that buys a new car will face a new regime of car tax. And overnight it will make many of the UK’s most popular new motors much more expensive to own. 

Will new rules affect my current car?

The car tax regulations are complex, so let’s get the easy bit out of the way first. Any car registered before 1 April, 2017, will continue to be taxed as it currently is and cost its owner the same annual sum in Vehicle Excise Duty (VED).

Yes, it’s confusing. But even the government appreciates that it would be unfair to introduce retrospective taxes for drivers that it encouraged to buy cars with low CO2 levels.

At the moment, there’s a sliding scale of car tax that goes from ‘Band A’ to ‘Band M’. It would seem the number of drivers buying low emission cars has taken the government by surprise.

Currently, cars that pump out 100g/km of CO2 are exempt from road tax. They’re labelled Band A for VED. So, if you’re already the proud owner of a Fiat 500 TwinAir or Ford Fiesta 1.0, then you’ll continue to pay nothing in tax.

Similarly, if you have an SUV, like the popular Nissan Qashqai dCi 130, and were paying £30 a year in tax for emissions of 116g/km (Band C), nothing will change.

At the top of the scale, for cars that emit more than 255g/km, such as a Land Rover Range Rover Sport 5.0 V8, road tax remains £515 a year.

How is the 2017 car tax system different?

car tax

Popular sellers like the Fiat 500 TwinAir will cost more to tax in 2017

From 1 April, for the first year that a car is registered, it will incur road tax that is charged according to a sliding scale of 13 CO2 bands. In subsequent years, it will face a flat rate of £140. If the car costs more than £40,000, there’ll be an additional £310 annual bill for years two to six.

This means that only cars with zero emissions – pure electric cars – costing under £40,000 will be exempt from road tax.

The inexpensive Fiat 500 will become £380 more costly

If we look at the Fiat 500 TwinAir (88g/km), tax will cost £100 in year one, then a flat rate of £140 a year thereafter. If you run the car over a three-year finance period, as so many British drivers do, it means that the inexpensive Fiat has become £380 more costly.

The Ford Fiesta 1.0 (99g/km), will shoot up from zero to £400 over the same three-year period.

A Nissan Qashqai dCi 130 (116g/km) rises from £90 to tax over three years, to £440.

Land Rover’s big, gas-guzzling Range Rover Sport 5.0 V8 would cost £2150 to tax over three years, according to the 2016 regs. But from next April, a buyer will end up with a £2900 bill.

You can view the government’s road tax bands from April, 2017 here.

What if I spend more than £40,000?

New cars like the Range Rover Sport 5.0 V8 will face a hefty rise in road tax from April, 2017

New cars like the Range Rover Sport 5.0 V8 will face a hefty rise in road tax from April, 2017

Then you’ll be clobbered with a bigger road tax bill. The charge of £310 a year for the car’s five years after its first year is calculated on the total list price of the car – not the price before options. An upgraded infotainment system, or larger alloy wheels could prove very costly indeed.

And even if you haggle hard and secure a discount that brings the invoice price of the car below £40,000, the road tax will be based on the pre-discount sum. Many drivers could be caught out by this quirk.

Should I buy a new car before the changes?

If you were planning to buy a car that was exempt from road tax under the existing rules, and know it’s going to be hammered by the changes, then yes. You could do yourself a favour and save hundreds of pounds by buying before April. The best advice is to grab a calculator, pen and piece of paper and crunch the numbers.

 

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