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New Car Tax Rules for 2017

Starting on 1st April 2017, there will be changes to car tax affecting purchases of new vehicles. The new system will incorporate Vehicle Excise Duty (VED), which means some cars will now be a lot more costly to run. This update will affect purchases of new cars from 1st April 2017 onwards.

How much VED will I have to pay?

The amount of VED you have to pay is determined by your car’s CO2 emissions. With the new car tax scheme, cars are segmented into CO2 bands (and only electric cars are eligible to be in the lowest band, which is tax-free). The rates are as follows:
●     £140 a year for petrol or diesel vehicles
●     £130 a year for vehicles with alternative fuel, such as hybrids, LPG, and bioethanol
●     £0 a year for vehicles with zero CO2 emissions, such as electric cars
Vehicles that have zero emissions and were bought new for £40,000 or less stay tax-free in the second year. New vehicles that are petrol and diesel, and cost £40,000 or less, have to pay £140 a year.
Vehicles bought for £40,000 or more have to pay £310 from year two onwards, regardless of their vehicle type, until year five. After five years, the vehicle will be taxed at the standard rates of either £140, £130, or £0 (depending on vehicle type). So if you own an electric car that costs more than £40,000, your car tax will no longer be free.

VED car tax rates

For vehicles registered on or after 1st April 2017, the amount you’re required to pay is dependent on your vehicle’s CO2 emissions, which can be seen in the table below.

CO2 emissions (g/km) Petrol (TC48) and diesel cars (TC49) Alternative fuel cars (TC59)
0 £0 £0
1-50 £10 £0
51-75      £25 £15
76-90 £100 £90
91-100    £120 £110
101-110 £140 £130
111-130 £160        £150
131-150 £200 £190
151-170 £500 £490
171-190 £800 £790
191-225 £1,200 £1,190
226-255 £1,700    £1,690
Over 255 £2,000    £1,990

Source: Gov UK

Things to consider with the new VED

If you’re considering purchasing a vehicle that’s near the £40,000 mark, this is inclusive of the vehicle’s final list price - so if your vehicle is bought for £38,500 and you purchase £2,000 of optional extras, you will have to pay the £40,000 premium fee.
This also is applicable if you manage to barter the price of your new vehicle down from £40,000. You will still have to pay the £40,000 premium fee (even if you paid £39,000) because its listed price is £40,000.
List prices do not include the cost of number plates, vehicle registration, fuel, or a delivery charge.
If you bought your new car before 1st April 2017, then these changes will not apply to you as this new car tax rule only applies to vehicles registered on or after that date.

Contact us

Don’t forget that if you have any questions about VED or your Motor Trade Insurance, you can get in touch with us today!

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