Have you heard about the changes to Vehicle Excise Duty (VED), your car tax, which are due to come into force on 1st April 2017? Whether you are going to buy or lease a car you need to be familiar with the new rates.
In short, car tax is going to be more expensive for many of us. We’ve explained the changes below and offer some advice if you are looking at leasing a car.
Essentially:
- First year rates of VED will vary according to CO2 emissions of all vehicles.
- Subsequent years will see a flat standard rate of £140 - this is on all but zero-emission cars
- Cars with a list price above £40,000 will owe a supplement of £310 on the standard rate, after the first year for five years (after 5 years the standard rate will apply.)
- All cars registered before 1st April 2017 are exempt from these changes
Our advice
Car tax is what it is……..death and taxes, the only certain things in life!!
Alos, remember that Road Fund Licence is included with contract hire. You don’t get a disc any more but it’s all taken care of.
You can see a full list of bands and rates here
Some examples of how VED costs will increase
- Peugeot 208 1.2 PureTech current VED is £20 a year; after 1 April 2017 that will rise to £140 (£11.60/month)
- Mondeo 1.5 EcoBoost current VED is £130 a year; after 1 April 2017 that will rise to £200 (£16.60/month)
- Nissan Qashqai 1.6 dCi N-Connecta current VED is £0 a year; after 1 April 2017 that will rise to £160 (£13.30/month)
- Jaguar XE 2.0i R-Sport auto current VED is £355 a year; after 1 April 2017 that will rise to £800 (£66.66/month)
Why the change?
The current structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178 gCO2/km. The Band A threshold of 100 gCO2/km below which cars pay no VED was introduced in 2003 when average new car emissions were 173 gCO2/km. Since then, to meet EU emissions targets average new car emissions have fallen to 125 gCO2/km.
This means that an increasingly large number of ordinary cars now fall into the zero- or lower-rated VED bands, meaning they pay no tax at all. This has been costing the Treasury millions.
More about the new rules
Under the new rules - only electric and hydrogen cars will be exempt - and all other cars will pay a flat rate of £140. So if you’ve been thinking about going green - perhaps now is the time!
The new rules will mean that cars registered after April 1st 2017 will pay a one-off tax charge for the first year, with rates decided by a heavily revised version of the current CO2-based tax band system. You can view this here
From the second year onwards, the CO2 scale becomes irrelevant, as flat rates are applied – a £-zero VED rate for zero-emissions vehicles only, and a flat annual rate of £140 for all other cars.
In addition, cars costing over £40,000 will also be liable for the £140 VED rate from year two, they will also be forced to pay an additional annual ‘supplement’ of £310 for the first five years.
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