Road tax law changes

A UK Car Road Tax disc issued by the DVLA with a car key and electronic central locking remote fob

From April 1st 2017, changes to Vehicle Excise Duty (VED), commonly referred to as road tax, have come into place. These were proposed in 2015 by the former Chancellor George Osborne, who claimed that by 2017, 75% of vehicles would be eligible for free road tax under a system that “isn’t sustainable and isn’t fair.”

The increased revenue earned from the changes to road tax will be used to fund road maintenance across the UK. New and existing drivers need to be aware of the vehicle tax changes, to ensure there will be no shocks on their car tax bill when buying a newly registered car.

Vehicle excise duty changes

The changes to road tax will only affect cars that are newly registered with the DVLA from April 1st 2017. This means that if you buy a used car built before then, the old vehicle tax laws will still apply, as used cars will already be registered and have the V5C document to prove so. Many of the new cars that were previously exempt from vehicle tax will now have to pay a certain rate, even if they produce less than 100g/km of CO², unlike in the previous road tax bands.

New tax bands

A major change in road tax is that there are now three main car tax bands. For each one, the vehicle tax for the first year will be based on CO² emissions, with a fixed rate for the following years depending on the type of vehicle.

Zero

Cars that produce no CO² emissions are still exempt from road tax, for the first year at least. Those worth less than £40,000 are free from VED. However, vehicles that are worth over £40,000 will be subject to a £310 surcharge for the first five years.

Standard

The majority of vehicles will fall into the standard car tax band. This covers all petrol and diesel vehicles worth less than £40,000, which will have to pay a standard rate of £140 after the first year. The first year will still be based on CO² emissions, though these have changed as well. Alternative fuel vehicles (hybrids, bioethanol and LPG) are also included, with a standard rate of £130 a year, after the first 12 months.

Premium

Vehicles worth over £40,000 fall into the premium category. While they will only need to pay £140 per year, there is also a £310 surcharge for the first five years.

Cars most affected

It is owners and drivers of small, fuel-efficient vehicles that will be impacted most. Many with under 100g/km of CO² emissions that would have been exempt will now have to pay £140 a year. This includes models such as the Peugeot 208, various versions of the Toyota Prius and many more. The only models to benefit financially from the changes are sports cars and SUVs under £40,000 with CO² levels over 226g/km, which can work out cheaper.

Make sure that you’re aware of the road tax law changes to avoid discovering a nasty surprise in your VED bills in the future.

Image courtesy of iStock.

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