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Car Tax Changes 2017

New Car Tax Rates for 2017

Any vehicle registered in the UK must be taxed if it is being used or it is kept on a public road. In his summer budget of 2015, former Chancellor George Osbourne announced significant changes to Vehicle Excise Duty (VED), more commonly known as ‘road tax’.

These changes are set to come into force from 1st April 2017 and will alter the way that road tax is calculated. For most of us buying a new car, we are likely to be out of pocket if we wait until after the new system is in place.

Under the current scheme, road tax is solely based on a vehicle’s CO2 output. Cars are divided into VED bands based on their CO2 emissions to incentivise uptake of the very cleanest cars.

Introduced in March 2001, the outgoing system came at a time when average new car emissions in the UK were 178 g/km. The tables show how road tax is currently calculated and how it will be calculated from 1st April 2017 onwards.

What is changing with road tax?

Car’s that produce less than 100g/km of CO2 currently pay £0 in road tax. However, as of 1st April 2017, only cars that produce 0g/km and cost less than £40,000 will be eligible for £0 VED.

In the new system, cars are divided into three bands: zero emissions, standard and premium. CO2 emissions still divide cars into a band, but this only applies to first year tax costs; the three band system then takes over from the second year onwards.

The restructured VED system details that any vehicle emitting more than 1g/km of CO2 will now be charged anything from £10 - £2,000 in the vehicle’s first year of ownership from new.

From year two onwards, a standard rate of £140 is applied to all cars producing greater than 1g/km of CO2 that costs less than £40,000 when purchased new.

If, however, your car produces CO2 emissions greater than 1g/km and cost more than £40,000 you will be subject to a charge of £450 from year two onwards.

Similarly, if your car costs more than £40,000 but produces 0g/km CO2 emissions you will not have to pay anything in year one of ownership, but you will be charged £310 road tax from year two onwards.

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

Cars that are registered before April 1st 2017 will continue to pay the current VED rates, even after the new VED bands come into force.

Current road tax bands won't change for cars that are already registered.

Current vehicle VED tax band and prices:

Tax BandCO2 Emissions g/kmFirst Year RateAnnual Rate
A 0-100 £0 £0
B 101-110 £0 £20
C 111-120 £0 £30
D 121-130 £0 £110
E 131-140 £130 £130
F 141-150 £145 £145
G 151-165 £180 £180
H 166-175 £295 £205
I 176-185 £350 £225
J 186-200 £490 £265
K 201-225 £640 £290
L 226-255 £870 £490
M Over 255 £1,100 £505

In the current system, any car under 100g/km pays £0 road tax

New vehicle VED tax band and prices:

CO2 Emissions g/kmFirst Year RateStandard Rate (Year 2 onwards)Stadard Rate (Year 2 onwards) for cars costing >£40,000
0 £0 £0 £310
1-50 £10 £140 £450
51-75 £25 £140 £450
76-90 £100 £140 £450
91-100 £120 £140 £450
101-110 £140 £140 £450
111-130 £160 £140 £450
131-150 £200 £140 £450
151-170 £500 £140 £450
171-190 £800 £140 £450
191-225 £1,200 £140 £450
226-255 £1,700 £140 £450
More than 255 £2,000 £140 £450

How do road tax changes affect you?

Ultimately this depends on the car you are looking to buy because you could be a significant winner or loser based on how much you would currently pay and how much you will be paying next year.

If you're not considering changing your car before 1st April 2017 then you will be subject to the new road tax charges regardless. However, before you disregard the idea, you should do the maths.

In the VED current system, a car that produces CO2 emissions of 100g/km of less will cost you £0 in road tax every year. However, under the new system, unless the car has zero emissions you will have to pay a minimum of £140 in road tax from year two onwards, plus a one-off fee for year one that is dependent on the car's CO2 emissions.

Blue Renault Captur
You will be paying a lot more road tax for a Captur registered after 1st April 2017

Here at Wilsons, we have done the calculations for some of our most popular models across our eight franchises to see how you would be impacted if you left buying your new car until after April 2017. The findings (in the table below) make for some very interesting reading. According to the makes and models we researched, over a three year period you will typically be looking at paying an extra £280 in road tax.

Four of the cars we chose - Peugeot 208, Fiat 500, Renault Captur and Citroën C1 - would not have paid any road tax because the specified engines produce CO2 emissions below 100g/km. However, under the new VED system, owners of these cars from new that are registered after 1st April 2017 will have to pay a fee in the first year between £100 and £120. They will then have to pay a further £280 in the subsequent two years as a result of the standard rate applied to all vehicles under £40,000 producing greater than 1 g/km of CO2 emissions.

The largest percentage increase of current payments to future payments from the cars on our list is the Renault Clio. If you decide to choose the Energy TCe 90 petrol engine, it produces emissions of 104 g/km. This would currently cost you £0 in road tax in its first year and then just £30 a year in subsequent years of ownership. But, if you decide to purchase this car after the road tax system changes, you will have to pay £140 for the first year and then another £140 a year in subsequent years of ownership. That is a 950% increase over just three years.

Even if you want to buy a larger model such as the Nissan Qashqai, Dacia Sandero or Citroën C4 Picasso, you would still see a 633% increase in road tax if you were to purchase a model registered after April 1st 2017.

To avoid getting stung by the new road tax system, you are more than likely going to be better off if you invest in your new car before 1st April 2017.

Car ModelCO2 Emissions g/kmCurrent First Year RateNew First Year RateThree Years' Tax Current RateThree Years' Tax New Rates% Change in Three Year Ownership£ Change in Three Year Ownership
Peugeot 208 1.6 BlueHDi Active 90 £0 £100 £0 £380 N/A* +280
Renault Captur Energy dCi 110 Dynamique Nav 98 £0 £120 £0 £400 N/A* +280
Fiat 500 0.9 TwinAir (105) Lounge 99 £0 £120 £0 £400 N/A* +280
Citroën C1 1.2 PureTech (82) Feel 99 £0 £120 £0 £400 N/A* +280
Renault Clio Energy TCe 90 Dynamique S 104 £0 £140 £40 £420 950 +280
Nissan Qashqai 1.6 dCi (130) N-Connecta 115 £0 £160 £60 £440 633 +280
Dacia Sandero TCe 90 Ambiance 116 £0 £160 £60 £440 633 +280
Citroën C4 Picasso PureTech (130) Feel 116 £0 £160 £60 £440 633 +280
Vauxhall Corsa 1.4i (75PS) ecoFLEX Energy 118 £0 £160 £60 £440 633 +280
Vauxhall Astra 1.4i (100PS) Design 124 £0 £160 £220 £440 100 +220

*Cannot give a percentage increase because road tax in the outgoing system was £0