You may already be aware of the upcoming changes in the UK’s system for taxing vehicles. All cars registered after 1 April 2017 will be subject to the new Vehicle Excise Duty (VED) changes.
Some aspects of the existing system will remain in the new one. New vehicles will still be sorted into 13 different CO2 bands. The amount of money you pay on new vehicles in year one, depends on which band your car falls into. Only cars that emit zero emissions can be placed in the lowest band, which will be tax-free in 2017’s tax bandings.
The amount you pay from year 2 year onwards depends on the cost of your vehicle new. If your car costs less than £40,000 and emits zero emissions you will pay no tax. If your car costs less than £40,000 and runs on a petrol, diesel or hybrid engine you will be subject to a flat rate of £140. However, if your car costs over £40,000 you will have to pay the premium fee of £310 – regardless of which CO2 band it falls into.
If a zero-emissions vehicle costs more than £40,000, you will still have to pay the premium fee after year one. This is a big change as electric vehicles are currently completely tax free – regardless of cost.
Buyers must mindful of the total list price (including VAT), as added extras could push the price over the £40,000 threshold, leading to a significant rise in the amount of road tax you pay. Even if you bargain a discount and pay less, the list price will remain the same and you will still be eligible to pay the premium fee. If you purchase your car before 1 April 2017 you will not be subjected to these new rules, instead you will remain in the current taxing system.