VED overhaul takes effect in April

Cars on an autumn street

Save money on your car insurance

Start a quote

With effect from 1 April 2017, all new cars sold in the UK will be liable to Vehicle Excise Duty (VED) unless they have zero emissions.

This is a major change. New low emission cars will be hit with VED (often referred to as ‘car tax’) for the first time, and new zero emission cars costing over £40,000 will pay an annual tax levy.

What’s changing?

Until April 2017, cars emitting 0 – 100g/km of CO2 have been exempt from VED. Now only zero emission cars escape the tax.

For all others, for the first year after the car is first registered, the amount of VED payable will depend on the vehicle’s CO2 emissions (see table below).

In subsequent years, there will be a fixed standard rate of £140, with zero emission cars continuing to be exempt.

For all cars costing over £40,000, including zero emission models, an additional tax levy will be payable for five years. This is £310 for zero emission cars and £450 for all others.

After five years, the levy is the standard £140.

The tax regime for cars registered before April 2017 is not changing.

The government says the new system will be fairer and will encourage people to purchase lower and zero-emission cars. The money raised from Vehicle Excise Duty will be paid into a new Roads Fund, which will be spent on improvements and repairs.

The current average amount of VED per car is £166 a year.

How it could affect you

If you drive a low emission car, you’ll be used to paying little or zero car tax.

If you buy another new low emission car after April 2017, you will see an increase in the car tax you pay.

In general terms, there will be winners and losers under the new regime. It really all depends on which car you buy, and what tax rate you currently pay.

Here’s an example…

If a driver currently falls under tax band K, driving a petrol or diesel car with a CO2 emission of 201 g/km, they’ll pay £1,830 over the next five years (that’s the first year amount of £650, plus 4 x £295).

If this same driver was to purchase a petrol or diesel car with the same CO2 emission as above after April 2017, they would be expected to pay £1,760 over the next five years (£1,200 plus 4 x £140).

A smaller amount – but a much larger amount to find upfront in the first year.

If this driver decided to change to a lower emission car after April 2017, let’s say to 120 g/km, they would pay just £720 over the next five years (£160 plus 4 x £140).

If this driver decided to purchase an electric car with zero emissions, it would cost them £0 over the next 5 years (providing the car cost less than £40,000 – if it cost more, they would pay 5 x £310 = £1,550. After five years, the standard £140 rate would be payable).

The table shows the current tax rate (for cars registered on or after 1st March 2001) along with the new 2017 tax rate.

 

Current VED rates

 

 

New 2017 tax car rates payable from 1 April

 

 

 

Co2 emissions

First year registered  (£)

Standard yearly amount (£)

CO2 emissions

First year (£)

Standard (£)

Standard for cars costing £40,000+ (£)

Up to 100 g/km

0

0

0 g/km

1 – 50 g/km

51 – 75 g/km

76 – 90 g/km

91 - 100 g/km

0

10

25

100

120

0

140

140

140

140

310

450

450

450

450

101-110 g/km

0

20

101-110 g/km

140

140

450

111-120 g/km

0

30

111-130 g/km

160

140

450

121-130 g/km

0

110

 

 

 

 

131-140 g/km

130

130

131 – 150 g/km

200

140

450

141-150 g/km

145

145

 

 

 

 

151-165 g/km

185

185

151 – 170 g/km

500

140

450

166-175 g/km

300

210

171-190 g/km

800

140

450

176-185 g/km

355

230

 

 

 

 

186-200 g/km

500

270

191-225 g/km

1200

140

450

201-225 g/km

650

295

 

 

 

 

226-255 g/km

885

500

226-255 g/km

1700

140

450

Over 255 g/km

1120

515

Over 255 g/km

2000

140

450

Did you enjoy that? Why not share this article