The 2017 Car Tax Changes Explained

Our guide to Vehicle Excise Duty (better known as car tax) reveals just what the road tax changes will mean for you.

New road tax rates, also known as Vehicle Excise Duty (VED), are being introduced for all new cars registered after 1st April 2017. The money raised from these new rates will help repair the nation’s roads.


This short guide will aim to explain:

  • What the car tax changes are
  • How much you’ll pay
  • Which cars are exempt.


What are the 2017 car tax changes?

Over the past few years, car manufacturers have been making their cars cleaner and more efficient, which meant the generous rates of Vehicle Excise Duty were being taken advantage of. Currently, any new car that sat below band D (121 – 130g/km CO2) did not pay a significant amount of annual road tax.

With all this in mind, the new changes being brought in will aim to put the money back into the pocket of the Chancellor to repair the nation’s roads.


Road tax changes: the current rates

All cars registered after 1st March 2001 won’t face any road tax changes and will continue to pay the current road tax rates. These are set out with two different rates of tax, one that applies to the first year only and a second that applies for that year and every subsequent year, i.e. first year = £0 and second year onwards = £30.

The Vehicle Excise Duty rates were set out based on your car’s CO2 emissions, with different rates set out for alternative fuel cars such as hybrids, biofuels or gas.

The rates have different bands assigned to them, from A to M. Cars in band A have the lowest CO2 emissions and are currently completely exempt from paying any car tax, through to M with the highest CO2 emissions which is subject to the highest rate of £1,120 in the first year and £515 thereafter.


Car tax changes: Current (pre-April 2017) road tax rates


*Band K includes cars that have a CO2 figure over 225g/km but were registered before 23rd March 2006.   


What does it mean for cars registered before March 2001?

Cars registered before March 2001, won’t face any road tax changes as the rates will remain as they are. These were charged based on the size of engine i.e. those with an engine smaller than 1549cc pay £145 a year and those above will pay £230 a year.

For classic cars, a continuous 40-year road tax exemption applies as of 1st April 2015. Any car that was built 40 or more years ago will be exempt from Vehicle Excise Duty, from the 1st April each year.


Vehicle Excise Duty: New road tax rates from April 2017

The road tax system will be undergoing major changes from 1st April 2017, with all cars registered after this date affected. The rates will not be backdated, so all cars registered before this date will continue with the current road tax rates in place (as explained above).

The changes brought in include a different rate for the first year, still based on CO2 emissions and then a standard £140 rate will be applied to all cars from the second year and thereafter, regardless of what your CO2 emissions are. The only cars exempt from paying any rate are cars with zero emissions.

However, cars priced over £40,000 will be subject to paying an additional £310 supplement per year, for five years, after the first year i.e. between the 2nd and 6th year. This is also the same for cars that are priced over £40,000 and have zero emissions. 


Road tax changes: April 2017 and onwards


So, will I be paying more now?

The answer is not a simple yes or no. It depends on the car you purchase, but the people that are being hit the hardest now are the ones purchasing eco-friendly cars.

For example; post-April 2017, for anyone purchasing a new car that has emissions at 100g/km or lower, they will be paying out £680 in tax over a five-year period, whereas in the current system (pre-April 2017) they would be charged no tax at all.


UK road tax changes: The rules

The system in place by the DVLA for collecting and enforcing your road tax is not being changed in line with the new Vehicle Excise Duty rates.

The existing options of paying for 12 or 6 months upfront remains the same but there is now also the option to pay monthly via Direct Debit. We would highly recommend you use this method of payment going forward. The advantage of this being that you will continue to pay tax until you tell the DVLA to stop, so you avoid missing any payment because it is auto-renewed every year.

Alternatively, the DVLA will send you a reminder when your road tax is up for renewal where you can opt to pay online, over the phone or at your local Post Office.


What happens when I sell my car?

When you sell your car any tax remaining on the vehicle will be refunded to you. The new owner will then need to set up the car tax going forward.

However, if you were to do this a week into a month after your payment has been taken, you will not get this month refunded back and the new owner of the car will also have to pay for that month, meaning the DVLA will receive two payments for one car for the same month.


2017 Car tax changes: In a nutshell

From the 1st April 2017, any car registered after this date will be subject to the road tax changes.

Any car that has been registered after 1st March 2001 to the end of March 2017 will continue to pay the car tax rates set out in 2015.

To be exempt from paying any car tax at all, you will now need to either buy an electric car or low-emissions car that was registered before 1st April 2017 or a car with zero CO2 emissions priced under £40,000.


Next steps…

If you are looking to buy a new car but are confused about these changes, come and speak to us. Our sales teams across each of our dealerships will be able to answer any questions you may have and guide you through your new car purchase. Visit your preferred JCT600 dealership today.


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