From April 2017, new road tax tax rates will apply to all new cars. As that date draws ever closer, many motorists may be concerned about the incoming changes to road tax bands and how it will affect their pockets and their choice of car.
The Band A threshold of 100 gCO2/km below which cars pay no Vehicle Excise Duty (VED) was first introduced in 2003. Back then, average new car emissions were 173 gCO2/km. However, average new car emissions have fallen to 125 gCO2/km, which means that an increasingly large number of ordinary cars now fall into the zero- or lower-rated VED bands. This also means that the government receives less tax.
Under the new system, first-year payments will be introduced across all bands except for zero emission cars, which will pay £0.
Those emitting more CO2 will pay more tax in the first year, but after that there will be a flat rate of £140 a year. There will also be a new supplement of £310 per year on cars costing more than £40,000.
What are the new VED bands from 1st April 2017?
First Year Rate
*cars over £40000 pay £310 supplement for 5 years
Five things to know about the new VED bands
- They only apply to cars registered after April 2017;
- Cars bought before April 2017 will continue to be taxed under the current system;
- CO2 output is irrelevant from the second-year onward, with two new flat rates – a £0 VED rate for zero-emissions vehicles and a flat annual rate of £140 for all other cars;
- Cars over £40,000 are liable for the £140 year two rate as well as an additional annual supplement of £310 for the first five years;
- Zero emission cars that cost over £40k must 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. From then they revert to the £140 flat rate.
As we previously reported, the supplement has been dubbed the ‘Tesla tax’ and seems absurdly counterproductive. The government says it is to ensure ‘those who can afford the most expensive cars make a fair contribution’, which to us sounds more like a wealth tax than a road tax.
How will the new VED bands affect leasing?
Road tax should already be included in your monthly car leasing price for the full duration of the contract. As the finance company is the legal owner of the car on the V5 document, it is responsible for the tax. Always check your lease agreement.