Vehicle tax rates: new road tax rules for 2017 explained

  • Author: OPONEO.CO.UK

From the start of April, vehicle road tax rates will change. All new cars in the UK will come under one of three vehicle excise duty (VED) categories. These bands will not just focus on the selling price of the vehicle - they will also take emissions into account.

So, are you prepared for the new road tax rules in 2017? Before we begin, it’s worth noting that this only impacts new cars registered after the 1st of April, 2017. Every previous car will come under existing VED bands.

 

 

carbon-exhaust-system

2017’s new vehicle tax rates will be based on emissions.

Understanding the new vehicle car tax rates

For the first year, all vehicles will be taxed based on their CO2 emissions. This is further separated into one band for petrol and diesel cars, and another band for hybrid and electric vehicles (alternative fuels). However, there is also an additional caveat for cars worth more than £40,000, we will explain shortly.

When it comes to CO2 emissions, these new vehicle tax rates are broken down like so:

CO2 emissions (g/km) Petrol And Diesel Cars Alternative Fuel Cars
0 £0 £0
1 - 50 £10 £0
51 75 £25 £15
76 - 90 £100 £90
91 - 100 £120 £110
101 - 110 £140 £130
111 - 130 £160 £150
131 - 150 £200 £190
151 - 170 £500 £490
171 - 190 £800 £790
191 - 225 £1,200 £1,190
226 - 255 £1,700 £1,690
Over 255 £2,000 £1,990

After this, cars will be fixed rates of vehicle tax for different car types. These are:

  • £0 for cars with zero emissions.
  • £130 for vehicles for alternative fuels, such as hydrogen and LPG.
  • £140 for petrol and diesel vehicles.

Vehicle tax rates for cars worth over £40,000

If your car is valued at over £40,000 you will have to pay more. For the first year, you will pay rates based on emissions, just like cheaper vehicles. For subsequent five years, the vehicle will be subject to the same VED bands, with the addition of a £310 charge. Once these 5 years have passed, the vehicle will pay the same bands as the cheaper vehicles do.
 
In other words, a car worth over £40,000 will have to pay an additional £1550 over the first 5 years of ownership.

How will this impact new cars?

Depending on what car you purchase, 2017’s vehicle tax rates will likely have a noticeable change on how much tax you pay. Let’s look at each type in more detail.

Petrol And Diesel

With a potential average cost of £140, it is likely that new petrol and diesel vehicles will cost more than those produced just before the tax change date.
 
As Auto Express points out, using a Peugeot 208 as an example, a car that costs £20 to tax each year will cost £140 if it is registered after April. In other words, drivers would save £120 if they register their car before then. Similar changes can be noted in a lot of vehicles - especially those with higher emissions.

Hybrid

While many drivers thought these tax rates might be kinder to hybrid vehicles, the potential savings do not live up to this.

Bmw-hybrid-car

Under the new tax vehicle tax rates for 2017, hybrids will pay marginally less than diesel/petrol cars.

In short, any hybrid car will have to contribute some form of tax. At £130, the yearly costs are only £10 lighter than fully-combustible petrol or diesel based vehicle. This could add hundreds of pounds to a typical hybrid’s tax rates. The only benefit is that hybrids generally have a reduced emissions rate and will likely save a little more in the first year of registration.

However, just like petrol and diesel cars, it is likely that many hybrids will be registered before the changes, so that they can benefit from the older VED banding system.

Electric

Under this new system, electric cars will be the only type of vehicle able to remain tax free - but only if such a vehicle costs less then £40,000. A car that goes over this amount will be subject to £310 for the first five years of ownership.

nissan-leaf-electric

Under the new vehicle tax rates, electric cars under £40,000 will pay nothing.

So, how feasible is this? Although an official UK price hasn’t been announced, the upcoming Tesla Model 3 is set at $35,000, which translates to £28,724.50 - over £10,000 under limit. Yet the Tesla Model S - using the basic 60 variant - usually sells for at least £60,000 - a good £40,000 over and, therefore subject to £1550 of tax, spread over 5 years.

The Nissan Leaf, similarly, costs around £26,000, so it is clear a number of electric vehicles are competitively priced to fall well below this band already. However, if you’re willing to pay £40,000 for a new vehicle, an additional £310 a year might seem like an easily-affordable expense.

So, in short, when these new tax ratings take over, expect your next car to cost a little more, unless it happens to be a low-value electric vehicle!

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