What Do The New VED Changes Mean For You?

Every new year brings changes, and in 2017 we see the new rules for VED (Vehicle Excise Duty) kick in. But what does this mean for you? The alterations to VED, otherwise known as road tax, will affect you if you purchase a new car from April this year. The changes were instigated by previous Chancellor of the Exchequer, George Osbourne, as a reaction to decreasing CO2 emissions levels from new cars in Britain. Under the current VED system, most new cars are paying a modicum of tax, or no tax at all – costing the government millions of pounds. The new road tax rules will mean higher tax rates for all new cars in the first year of registration, and a flat rate of £140 for the majority of cars after that.

Potential Cost To You

In reality, the new tax rules will add over £500 to the long-term running costs of the UK’s most well-liked and environmentally friendly cars, while offering substantial benefits for some of the most polluting vehicles. This means Britain’s most popular selling car – the Ford Fiesta 1.0 EcoBoost 100PS – will cost £540 extra to tax over four years, while purchasers of the Ford Mustang V8 will save £245 over the same 48-month period. This is in spite of the fact that the most powerful Mustang produces triple the amount of CO2 than the resourceful Ford Fiesta.

Up to now, zero VED has been offered by the government to attract buyers into ‘green’ cars, but, with 74% of new cars emitting under 130g/km of CO2, the government has made a reversal on its strategy and has initiated rules to make buyers of new, economical cars fork-out more. Under the present tax regulations, cars that emit under-99g/km meet the requirements for zero VED for the first year and cost zilch for every year after that. But, from 1 April 2017 the government will substitute the existing 13 band tax system with three bands – zero, standard, premium – coupled with a surcharge for electric vehicles with a list price exceeding £40,000. This means all new cars purchased after 1 April with below-99g/km CO2 emissions will qualify for road tax. This equates to a cost of £540 more in the long term running costs of some of the UK’s least polluting and most ecologically sound cars.

Conversely, while you’ll be forced to pay an extra £310 a year for cars over £40,000 for five years, a loophole in the tax law will enable some of Britain’s least green cars under the £40,000 price threshold to profit. Buyers of the Nissan 370Z, for example, will save hundreds under the new arrangement.

Perrys motoring journalist, Tim Barnes-Clay, said: “Lots of motorists are oblivious to the changes that are coming for road tax, but the fact is this – the structure is changing, and cars with low emissions won’t be as tax efficient as they once were. It’s a bit of a confusing message to raise tax on efficient cars, while lowering it on less environmentally friendly motors, when the government is trying to boost consumer interest in low and zero-emissions vehicles.”

What To Expect

So, the first time a new vehicle is taxed, the rate you pay will be based on its CO2 emissions. This is commonly known as its First Year Rate. This is usually paid during the purchase of a new car. From 1 April this rate will now increase, ranging from £0 for electric cars to £2000 for cars that have the highest polluting levels. The second time the vehicle is taxed one of three new standard rates will apply:

  • £140 for most petrol and diesel cars. For example, the Peugeot 108, currently £0 a year, will be £120 YEAR 1, £140 YEAR 2 and beyond. Over five years this will cost £680.
  •  £130 for alternative fuel vehicles. For example, the Kia Niro, currently £0 a year, will now be £100 YEAR 1, £140 YEAR 2 and beyond. Over five years this will cost £660.
  •  £0 for pure electric vehicles. For example, the Nissan Leaf, currently £0 before, will be £0 after!

But, if you are planning on buying a vehicle with a list price of more that £40,000 you will be subject to an extra £310 on top of the standard rate. This additional rate is payable for five years on top of the standard rate from the second time the vehicle is taxed. After the five  years end you will then pay the standard rate that applies for your vehicle. So, for a typical new petrol or diesel vehicle brought for more than £40,000, from the second time its taxed you will pay £450 a year for the next five years. For example a Ford Mustang, currently costing £515 a year, will cost £2,000 YEAR 1, so over five years this amounts to £4,250.

Other Popular Cars Hit By 2017 VED Changes

1) Ford Fiesta 1.0 EcoBoost 100PS Zetec

Existing VED cost over four years: £0
From 1 April 2017 VED cost over four years: £540

2) Vauxhall Corsa 1.3 CDTi 95PS ecoFlex Design

Existing VED cost over four years: £0
From 1 April 2017 VED cost over four years: £540

3) Ford Focus 1.5 TDCi 120PS Zetec

Existing VED cost over four years: £0
From 1 April 2017 VED cost over four years: £540

4) Nissan Qashqai 1.5 dCi 110PS Visia

Existing VED cost over four years: £0
From 1 April 2017 VED cost over four years: £540

Buy Before 1 April!

To find out more about the changes to VED, you should watch our video. You’ll see it stands to reason that there’s never been a better time to buy a new car. At Perrys we have more than 100 years’ experience and over 50 locations nationwide. We don’t do sales gimmicks, just a great car buying experience that our customers love. Find your new car today – you could save hundreds of pounds on your car tax if you buy before 1 April!