This year, annual road tax (Vehicle Excise Duty, VED) has changed from a banded system based on a car’s CO2 emissions to a flat-rate system.
Under the previous system, the treasury was experiencing great losses due to car manufacturers are producing increasingly eco-friendly cars. George Osborne, former Chancellor of the Exchequer, introduced the new system from April 1, 2017.
Previously, the amount of road tax a driver paid was based on the car’s CO2 emissions. Vehicles with less than 100g/km of CO2 were free from VED charges.
Since April 1, 2017, the first year of annual road tax is decided by how much CO2 your car emits. The band limits have now shifted and only cars with zero emissions (hydrogen and electric) are exempt. Drivers of cars with up to 100g/km now pay anything between £10 to £120 in the first year. From the second year of ownership onwards, drivers are charged a flat rate of £140, and only the zero emissions cars escape the levy.
If you choose a car with more than 255g/km of CO2, you now will have to pay £2,000 road tax in the first year. Plus, cars that cost more than £40,000 to purchase are subject to an extra £310 every year for five years. Even cars that fall below the threshold following deals or rise above it with additional trims are included in the additional tax.
These changes only affect cars that are registered after April 1, 2017. If you choose to buy a used car, you won’t have to worry about the changes – it’s only on new cars.
Most drivers will have to pay more for their annual road tax under the new system. In fact, small economical cars are said to be the most affected with many cars experiencing a 900% increase in price.
It’s worthwhile speaking to the professional sales advisers at the dealerships about how much it will cost to tax the car of your choice moving forwards, knowing the expense could make your decision much easier.