New 2017 road tax laws: A quick guide

On 1 April 2017, the Vehicle Excise Duty otherwise known as road tax will undergo major changes, here’s our quick guide to what’s changing.

If you’re buying or leasing a new car in 2017, you’ll need to know about the new laws coming into place regarding road tax. If you own a car registered before the 1 April 2017, these changes will not affect you, but if you’re looking into getting something new, our quick guide will tell you what new laws are coming in and how they may affect you.

“We want our money back!”

In the past few years, a massive push has been on for manufacturers to make more efficient cars. Obviously to avoid paying road tax, many motorists have opted for a more economical vehicle. This has resulted in the government losing out as too many people are opting for ‘super-efficient’ vehicles, the current taxation system is based on CO2 emissions, so this puts the government at a big loss.

Well, it was good whilst it lasted…

2017 changes to road tax

Under the new system, the rate of Vehicle Excise Duty (VED) will be split up into 13 bands, which band they go in will be calculated on a vehicle’s CO2 emissions. So now, only cars with 0g/km of CO2 will be eligible for free road tax.

This is a massive change, considering that from March 2001 onward; new cars emitting less than 130g/km of CO2 have been exempt from tax in the first year, and then tax would go up for each year after.

From April 2017, the cost is about to jump up significantly. For example, you will pay the same amount of tax for every year: If you paid £140 in the first year, you’ll pay the same in the second year and then the same for every year after.

The new system to work out the first-year rate of tax is based on what is classed as a ‘sliding scale’, this ranges from free road tax for electric and hybrid vehicles, all the way up to £2,000 if your car exceeds 255g/km of CO2. All vehicles that don’t land in the zero emissions band, for the second year will move to a flat rate of £140.

Thinking of getting one of the latest zero emission cars and getting away with paying no tax? Well, the government has news for you… Vehicles with a list price of over £40,000 – this is including zero emission cars – will get slapped with a rate of £310, each year for five years from the end of the first vehicle licence, then it will drop to the standard rate. So if you were looking at getting a Tesla Model S for example, thinking you would be free from road tax, it will be slapped with a cost of £310 a year.

Should I get my new car before April?

If you are in the market for a new car, you should probably consider registering before the end of March, the car industry is expecting this to be one of the busiest months of the year and on record for that matter, partly due to the road tax changes as well as motorists rushing the grab the new 17-plate.

So if you opted for a smallish car that emitted 99g/km of CO2, registered before the end of March and you’ll pay no road tax whatsoever. But if you register after, you’d pay £120 in the first year, then £140 from the second year onwards.

If you’re going shopping at the higher end of the scale at £40,000 and over, the government will be using the published list prices to work out tax, so if you start adding options onto your car you could get slapped with some unwanted tax.

Will my current car be affected by 2017 road tax changes?

The new laws regarding road tax will only affect vehicle vehicles bought after the 31st March 2017.

How will 2017 road tax laws affect leasing?

Road tax will already be included in your monthly rental for the full duration of the contract. The finance company is the legal owner of the car, therefore the finance company are responsible for the tax. Always check your lease agreement.