Announced in July this year, the Treasury has revised the current Vehicle Excise Duty (VED) payments for vehicles registered 1st April 2017 onwards to account for the growing number of tax-exempt cars being purchased – the current system, according to Osborne, being unsustainable.
Under the new rules, only Zero Emissions vehicles will remain tax exempt. If your chosen vehicle is emits 1g CO2/km or more, a one-off tax charge will apply to its first year based on a 13-band CO2 emissions based scale ranging from £10 to a staggering £2,000. Then, year 2 onwards, a flat annual rate of £140 will apply.
| New VED system – for cars registered from April 1st, 2017 | ||
| Emissions (g CO2/km) | Year 1 rate | Standard rate thereafter * |
| 0 | £0 | £0 |
| 1–50 | £10 | £140 |
| 51–75 | £25 | £140 |
| 76–90 | £100 | £140 |
| 91–100 | £120 | £140 |
| 101-110 | £140 | £140 |
| 111–130 | £160 | £140 |
| 131–150 | £200 | £140 |
| 151–170 | £500 | £140 |
| 171–190 | £800 | £140 |
| 191–225 | £1,200 | £140 |
| 226–255 | £1,700 | £140 |
| over 255 | £2,000 | £140 |
| * Cars costing over £40,000 pay a £310 supplement in years 2 to 6 | ||
It seems that over 60% of vehicles which currently pay zero tax in their first year of ownership will likely see their costs rise.
Furthermore, if your vehicle costs over £40,000, an additional £310 supplement will be payable for five years once the Standard Rate kicks in, i.e. years 2 to 6.
Vehicles registered before 1st April 2017 will be taxed under the old system, i.e. on a scale ranging from £0 – £1,100 based solely on CO2 emissions.
Whilst these new payments will be earmarked solely for road repairs, maintenance and improvements – the first time since the 1930s, many are disappointed that the new rates may disincentivise manufacturers to produce low emissions vehicles as they strive for zero emissions.
How will current models fare?
AutoExpress have published an enlightening list highlighting the highest and lowest proportional increases. Surprisingly, certain Peugeot 208, Ford C-Max, Lexus IS300h and VW Passat models all suffer 950% increases in road tax over 3 years – from £40 to £420. At the other end of the scale, the SEAT Alhambra increases around 10% from £435 to £480 and the Ford Mondeo EcoBoost by 23% from £390 to £480, again, over a 3 year ownership period from new.
Seeing how the elevated tax for first year ownership is likely to cost us all more for the vast majority of vehicles, once again, leasing comes into its own with those initial outlays and losses (depreciation) associated with driving a brand new vehicle, being reworked into affordable, fixed, monthly payments.
Talk to us at WVL about your vehicle requirements, the new road tax implications, and how we can help you drive your choice of vehicle at the best possible price.
