Vehicle tax, known as Vehicle Excise Duty (VED), is changing for cars and motor homes that are first registered after 31 March 2017. It will increase the purchase price and running costs of most new vehicles.
The change will not affect vehicles registered on or before that date.
The new scheme, which comes into force on 1 April, is based on a vehicle’s carbon dioxide (CO2) emissions and list price.
Under the present system, rates are split into bands so that the higher the CO2 emissions, the more tax you’ll pay. Low emission cars that emit less than 100g/km of CO2 are exempt from Vehicle Excise Duty (VED). But under the new scheme, only zero emission cars will be exempt from VED.
For new vehicles registered from 1 April 2017, the vehicle tax for the first year will be based on CO2 emissions.
The government has published a table of rates.
After the first year, the amount of tax that needs to be paid will depend on the type of vehicle. The rates are:
The tax will be different where the vehicle has a list price (the published price before any discounts) of more than £40,000. It will incur a supplement of £310 on its standard rate for the first five years. This will include electric and other zero emission cars.
So for the first year, the tax will be based on CO2 emissions, as above.
But then after the first twelve months, the tax rate will then depend on the type of vehicle (petrol, diesel, alternative fuel or zero emissions), with an additional rate of £310 a year for the next 5 years.
The total annual payment will start at £310 (electric), rising to £440 (alternative) and finally £450 (petrol or diesel).
After the five year period, the vehicle will then be taxed at one of the standard rates (£140, £130, or £0, depending on vehicle type).
The changes mean that electric cars which cost more than £40,000, and currently qualify for free car tax every year, will no longer be the tax-free option they are currently after year one.
The DVLA has published a video explaining the changes.
If you are contemplating the purchase of a new vehicle and would prefer to avoid the new charges, you may wish to ensure the vehicle is registered before 1 April 2017, subject to commercial and other considerations.
If you have any questions regarding the rates for new cars, please contact your usual Bishop Fleming adviser.
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