In the 2015 budget the then Chancellor of the Exchequer announced that in 2017 the way in which our cars first vehicle licence is calculated will be based on its CO2 emissions, it's quite a change.
What does this mean for you?
In simple terms it means that the majority of cars will move to a standard rate of road tax, £140 annually from the second licence. Any car with zero emissions will not pay the standard rate of car tax but, if a cars list price is over £40,000 at its first registration, the customer will pay the additional rate for five years after the end of its first licence.
Every car is affected by this change and not just the cars with a price tag of over £40,000.
The tables below demonstrates the changes that will take place to new cars registered after the 1st April 2017 - they also show the current road tax bandings.
VED Bands and rates for cars first registered on or after 1st April 2017:
|CO2 Emissions [g/km]||First Year Rate||Standard Rate*|
|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|
Current [pre April 2017] Road Tax Bandings:
|VED Band||CO2 Emissions||Annual Rate||First Year Rate|
|A||Up to 100 g/km||£0||£0|
|B||101 - 110 g/km||£20||£0|
|C||111 - 120 g/km||£30||£0|
|D||121 - 130 g/km||£110||£0|
|E||131 - 140 g/km||£130||£130|
|F||141 - 150 g/km||£145||£145|
|G||151 - 165 g/km||£185||£185|
|H||166 - 175 g/km||£210||£300|
|I||176 - 185 g/km||£230||£355|
|J||186 - 200 g/km||£270||£500|
|K||201 - 225 g/km||£295||£650|
|L||226 - 255 g/km||£500||£885|
|M||Over 255 g/km||£515||£1,120|
*Cars with a list price of over £40,000 when new pay an additional rate of £310 per year on top of the standard rate, for five years.
So, what does the above mean to your pocket?
Quite simply, if you purchase a new car before the 1st April 2017 and the CO2 Emissions are between 151 and 165 [based on current Petrol and Diesel Emissions] then the current rate of Road Tax [VED] would be £185.
If however you purchase the same car after the first of April with the CO2 Emissions based on the above table so between 151 to 170 then you will pay £500 – an increase of £315.
The table above will be effective from the 1st April 2017.
So who wins and who loses?
The changes have been created to earn the exchequer/government more money from the more popular eco-friendly cars.
The new changes will mean a car that is CO2 rated at 100g/km or lower – and which is currently free from paying road tax for life under the current system – will cost you £400 over three years, £680 over 5 years, or a whopping £1,380 over ten years.
So, to save yourself some money - now is the time to buy that new car and don't wait till after the 1st April.
But what if you are one of the many who aspire to own a reasonably-priced sporty or SUV style car?
Well, if that car is rated at 226g/km of CO2 plus, and if you intend to hold on to your car for many years then guess what, you’re 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 there or thereabouts equivalent to a year’s free petrol in a thirsty 20mpg car, doing on average 10,000 miles per year give or take a mile or two!)
And what about the cars over £40,000?
This is slightly more clean-cut! Unless your new car gives off more than 226g/km and you plan is to keep hold of the car for 10 years +, you will be much worse off buying after April 1st 2017.
Whilst these changes are quite complex and confusing when you first read over them, the easiest thing for you would be to find the car you want before the 1st of April 2017. Contact your chosen dealership and let their sales teams show you what the full extent of these changes are.
Don’t put off buying now when you could be better off buying NOW!