New VED road tax: buy now or after the 2017 UK car tax changes?

car tax calculator
15 Apr, 2016 2:41pm Chris Rosamond

Everything you need to know about the new UK VED road tax rules coming to the UK in 2017 and how they'll affect your car

New road tax rates for UK motorists are less than a year away, creating a dilemma for new and used car buyers; whether to buy now or wait until after 1 April 2017 when the new VED bands come into effect? 

Chancellor George Osborne's tax hike is expected to raise billions for the Treasury, with higher first year rates for all new cars and a flat rate of £140 thereafter, regardless of emissions. Only zero-emissions models will be exempt, while cars with a list price of more than £40,000 will be charged a £310 supplement. 

To find where savings can be made, Auto Express analysed eight classses of cars, from superminis to SUVs, and found buyers of smaller, cleaner cars registered after April 2017 will pay up to nine times more than they do now. Owners of more pulluting models will pay more under the new laws, too, but proportionately less than those running lowere-powered cars. 

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For example, owners of a Peugeot 208 1.2 PureTech currently pay £20 a year; after April 2017 that would rise to £140. As our table (below) shows, potential buyers will see bills increase nine-fold over three years. Tax-wise, it will be cheaper to buy a new Peugeot 208 before the VED changes. 

Yet while first year fees for a high polluting car like Honda's CR-V 2.0i VTEC SE will go up from £300 to £800 under the new regime, annual tax drops by £70 from the current £210 - making the CR-V a more ideal used buy after April 2017 than now. Across three years of CR-V ownership, that works out to a total rise of just 50 per cent. 

Highest proportionate increase

CO2 emissions

Current First Year Rate New First Year Rate Three years' tax current rate Three years' tax new rates % change three year ownership

Peugeot 208 1.2 PureTech (82) Allure

104g/km

£0

£140

 £40

 
£420
 
950%

Ford C-Max 1.5TDCi (120) Zetec

105g/km

£0

£140

£40

£420

 
950%

Lexus IS 300h Hybrid auto Luxury

103g/km

£0

£140

£40

£420

 950%

VW Passat 1.6 TDI S

105g/km

£0

£140

£40

£420

950%

Nissan Qashqai 1.6 dCi  (130) N-Connecta

 115g/km

£0

£160

 £60

 
£440
 
633.3%

Lowest proportionate increase

 

SEAT Alhambra 1.4 TSI (150)

 
150g/km
 
£145
 
£200
 
£435

 

 
£480
 
10.3%

Ford Mondeo 1.5 EcoBoost Titanium

 

134g/km

 

£130

 

£200

 

£390

 

£480

 

23.1%

Jaguar XE 2.0i R-Sport (auto)

 

179g/km

 

£355

 

£800

 

£815

 

£1,080

 

35.8%

Toyota Verso 1.6 V-Matic Icon

154g/km

 
£185
 
£500
 
£555
 
£780
 
40.5%

Honda CR-V 2.0 i-VTEC SE 4WD

 
173g/km
 
£300
 
£800
 
£720
 
£1,080
 
50%

Company car tax rules 2016

According to Philip Nothard, retail and consumer specialist at CAP HPI, new and pre-registered car sales could spike ahead of next year's VED changes. He told Auto Express: "We could experience a big spike in registrations prior to the introduction of the new tax regulations, as dealers and consumers pull registrations forward on models where there is a saving, or the opposite depending on the car's current VED band." He added: "Pre-registered vehicles can offer big discounts over new models. More savvy dealers may see the changes as an opportunity to drive sales of these cars." 

Read on for a more detailed explanation of the road tax changes, why they're taking place, and to see the savings you could be making before the switchover. 

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The truth behind the 2017 road tax band changes

The current road tax regime is costing the Exchequer a packet as carmakers have slashed the CO2 emissions of their cars to take advantage of the generous VED tax bands for lower-emissions vehicles.

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In fact, it’s reckoned that a quarter of new cars registered don’t pay any road tax at all as they fall into VED Band A for vehicles with CO2 emissions of less than 100g/km.

At present, new cars have to reach Band D (121-130g/km) before any significant annual road tax is charged. With tax revenues set to fall further as cars continue to get cleaner, the chancellor has deemed the situation ‘unsustainable’.

Tax Disc

What are the 2017 road tax changes in detail?

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.

The adjustments mean most buyers will see their first year tax charge virtually doubled, while only zero-emissions vehicles will get away with paying nothing at all.

From the second year onwards, the CO2 scale becomes irrelevant, as two flat rates will then be applied – a £0 (zero) VED rate for zero-emissions vehicles only, and a flat annual rate of £140 for all other cars.

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While 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. 

That means expensive £40k+ zero-emissions cars will no longer get away with a free ride, as they’ll have to pay the £310 supplement. Everything else in the £40k+ bracket will pay £450 a year (£310 supplement + £140 flat rate) until that five-year period is over and they revert to the £140 flat rate.

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VED tax bands: April 2017 onwards: table

VED car tax bands for cars first registered from 2017 onwards
Emissions (g/km of CO2) First year rate Standard rate
0 £0 £0
1-50 £10 £140
51-75 £25
76-90 £100
91-100 £120
101-110 £140
111-130 £160
131-150 £200
151-170 £500
171-190 £800
191-225 £1,200
226-255 £1,700
Over 255 £2,000
Cars above £40,000 pay £310 annual supplement for five years

Current (pre-April 2017) vehicle VED tax bands: table 

CO2 Emissions in g/km (tax band) First year rate Annual rate
Up to 100 (A) £0 £0
101-110 (B) £0 £20
111-120 (C) £0 £30
121-130 (D) £0 £110
131-140 (E) £130 £130
141-150 (F) £145 £145
151-165 (G) £180 £180
166-175 (H) £295 £205
176-185 (I) £350 £225
186-200 (J) £490 £265
201-225 (K) £640 £290
226-255 (L) £870 £490
Over 255 (M) £1,100 £505

The 2017 road tax changes – winners and losers 

As the rule changes are designed to net the exchequer more cash from popular eco-friendly cars, it stands to reason that these are the vehicles the new rules will hit hardest. 

The 2017 changes will mean a car that is CO2 rated at 100g/km or lower – and thus free of road tax for life under the current VED band system – will cost its owner £400 over three years, £680 over 5 years, or a whopping £1,380 over ten years. If you can buy the same car before the April 1st deadline, you’d be mad not to. 

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On the other hand, if you aspire to a reasonably-priced sporty model or SUV rated at 226g/km of CO2 or above, and if you intend to treasure it for years, you’ll be on to a winner. Buying that car after the April 1st deadline could save you almost £600 over five years – or nearly £2,500 if you keep it for 10 years. (That’s roughly equivalent to a year’s free petrol in a thirsty 20mpg car, doing 10,000 miles per year!) 

Nissan Leaf 60kWh - front driving

In the over £40,000 bracket, the option is even more clear-cut. Unless your chosen car emits more than 226g/km AND you intend to keep it for the best part of ten years, you’ll be much worse off buying after April 1st 2017.

An expensive 100g/km model that is currently free of VED will - under the new rules - cost £1,020 extra over three years, £1,920 extra over three years, and £2,930 extra over 10 years.

As if that wasn’t enough bad news, in all the ‘worst case scenarios’ the new rules are likely to adversely affect used car values for post-April 1st, 2017 registrations, too. 

What do 2017 road tax changes mean for cars already registered?

Current road tax bands won’t change for cars that are already registered, so the existing VED bands will remain in place - meaning cars registered before April 2017 will continue to pay the current VED rates even after the new VED bands come into force. Fortunately for owners, the existing rates for CO2 bands are much more favourable to lower-polluting vehicles. 

The current UK road tax rules explained

While the 2017 VED rate shake-up will affect a lot of motorists, the system for collecting and enforcing road tax is not being changed again.

The 2014 overhaul of the road tax arrangements ended the tax disc's 93-year reign and has already made the whole system cheaper to run. There is a catch, however, as you'll find out below.

Tax

The current road tax set-up also makes it tougher for those seeking to avoid paying road tax. Rather than the visual check that the tax disc made possible, the authorities now rely on number-plate recognition cameras to determine that a vehicle has been taxed. 

Switch to direct debit - don’t risk being caught with no road tax

Although it’s no longer a requirement to display a tax disc in your windscreen, this doesn’t mean you don’t have to pay car. The DVLA will send you a reminder when your road tax is up for renewal in the time-honoured fashion, and you can continue to pay your road tax online, over the phone or at the Post Office. 

The road tax price bands remain the same, as do the existing options of paying for 12 or 6 months tax upfront but there’s also the option of paying your car tax monthly. This new monthly option arrives in tandem with the facility to pay your road tax by Direct Debit.

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Drivers paying in monthly installments from their bank accounts will be subject to a 5% surcharge on top of the road tax price itself. That’s less than the 10% that’s added when you pay for six months tax, an option currently used by 23% of motorists. Only the one-off annual payment comes with no extra charges.

The key advantage of paying your car tax by Direct Debit is that the DVLA will continue taking the payments until you tell them to stop. It means that although you’ll no longer have an expiry date on the disc stuck to your windscreen, you’ll no longer need to remember it anyway. Your tax will be renewed automatically, and you can get on with more exciting stuff - like remembering your MOT.

What happens to your road tax when you sell your car?

Under the new car tax system, any remaining road tax will not transfer to the new owner with the vehicle. Instead, the seller can get a road tax refund on any tax remaining on the vehicle, while the buyer has to pay to re-tax the car. 

The tax refund on a sold car will be sent automatically when the DVLA receives notification that the car has been sold, scrapped, exported or taken off the road with a Statutory Off Road Notification (SORN).

Sellers are expected to inform the DVLA of any change of ownership straight away or face a £1,000 fine. If they don’t, they could also still be liable for speeding or parking fines incurred by the new owner.

Information on whether or not a car is taxed is available online via the Government website. All you need is the make and model of the car plus the registration number.

Is there a catch to the new Vehicle Excise Duty regime?

So far, so good for the new road tax system but as often seems to be the case, there is a catch.

The problem that's getting motorists riled centres around the refund you get on outstanding road tax when you sell your car. When ownership of a vehicle is transferred the previous owner gets a refund on any outstanding road tax but that refund is calculated from the beginning of the next month. The new owner, on the other hand, has to tax the car anew and their bill is calculated from the beginning of the current month.

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What this means is that the Government effectively collects two lots of tax on the car for the month where ownership is transferred, one from the new owner who pays for that month and one from the previous owner who doesn’t get the tax for that month included in their refund. It's sneaky stuff and should give a useful boost to the exchequer, but at the expense of motorists.  

Click here to read our guide on the current UK car tax bands and click here to sign up to our free e-mail newsletter...