Car Road Tax System Gets All Shook Up

If you’re thinking of changing your car? New tax rates may apply.

For years, successive governments have jiggled about with taxation systems in an attempt to baffle or shame us into paying more money than we need to. Usually, this is a highly scientific algorithm that involves CO2 emissions, incomprehensible paperwork, polar bears and lots of hormone-replacement therapy.

Let’s consider the evidence. There’s the congestion charge, surely about as helpful as a waterproof teabag and something that, to grasp even half-heartedly, requires a Masters in quantum mechanics.

Then there’s the recent legislation that forces the self-employed to file multiple tax returns each year. This is because they’re not already busy enough, obviously.

From this same wacky, save-the-polar-bear stable comes a new set of rules around VED (Vehicle Excise Duty). They came into effect on April Fool’s Day. You might not have noticed them yet, but you will if you’re buying a new car this September.

This is the biggest shake-up of the VED system since Roman times. The upshot is the government has done a load of jiggery-pokery with the tax bands. The tax on some new cars is now more expensive than the Koh-I-Noor diamond. Some, admittedly, are cheaper, but they might not be the kind of cars you’d want on your driveway.

If you own a low-emission petrol or diesel car, you’ll have noted with glee that your annual contribution to the Treasury’s coffers has been zero. No longer. Now only cars as clean as a Swiss maternity ward are exempt from VED. That means electric and hydrogen cars only.

On top of that, if your new car costs £40,000 or more, you’ll be shelling out a new five-year supplement. That’s £310 a year and starts after the first year.

Let’s look at the unfortunate case of the Lexus RC 300h 2.5 F-Sport 2-door CVT Auto. If you’re looking to buy one of these fine vehicles, your three-year cost of taxation will rise under the new rules from £30 to £1030. That’s a jump of 3333%.

In fact, most new cars will see a significant hike in first-year VED. A flat rate of £140 will then apply each year. But there is some good news. If your car’s a hybrid, or runs on LPG, bioethanol or possibly weak porridge, you’ll enjoy a magnificent £10 cut in your first year of tax. This then reverts to £130 a year thereafter.

If you’re looking for someone to blame, you could try former Chancellor George ‘Six Jobs’ Osborne, the man who added VAT to Gregg’s pasties and would probably tax your cat if it drank too much milk.

Under the old VED system, it seems we were all paying relatively small sums in road tax. This was costing the Government millions in untapped revenue every year.

The good news for existing owners is that, if your car was registered before 1st April 2017, you won’t be affected by the changes.

If you’re buying a car that’s been specifically designed to melt the icecaps, you’ll also pay more. For example, certain trims in the Honda CR-V range rise from £300 to £800. However, annual taxation after year one will fall from £220 to £140, making the CR-V a good nearly-new proposition.

In general, most new-car buyers will lose out. Smaller, more economical cars will be hardest hit and you might even pay nine times more than before. 

If you’re in the market for a Toyota Aygo 1.0-litre, for example, you’d have paid £0 a year in tax before April. You’re now looking at £120 for the first year, then rising to £140.

I’m off to buy a bicycle.

VED tax bands: April 2017

New car tax bands for cars registered from 2017
Emissions (g/km of CO2)First-year rateStandard rate
1-50£10£140 (£130 for alternative-fuel vehicles)
Over 255£2,000
Cars costing over £40,000 pay £310 supplement for five years starting after year one
Whatever your car needs, just regit

If we could get enough motoristoto scorn their cars and use public transport for a month demand road tax refund caotic

Proof if it was ever needed that road Tax (VED for those that insist its not a tax - joke!) bands are about Tax not the environment!

I bought a euro 6 with all the extras inc 2 cats, particulate and blutec, when it was launched imagine my anger and surprise that I pay almost DOUBLE the VED of the old euro 5 model with no filters / blutec etc obviously the push to cleaner vehicles doesn't apply to cleaner vehicles and VED charges on a current sept 2017 model is MASSIVELY higher...... I'm going to look for a "classic" no MOT and no VED..... but lots and lots of pollution

add to that the new euro 6 cars are unreliable and expensive trouble with a capital T, i won't be buying one

Do away with VED and put it on fuel. Much simpler and fairer all round. Those who use the most pay the most. This would also encourage more cycling and less car use.

Motorists have been saying this for years Martin.It will never happen.

I could not agree more .Imagine buying a zero emission electric car over 40 thousand poi rd and have g to pay 310 pounds a year.Its a disgrace.

I know, but we have to keep banging on about it although it is blatantly obvious! If enough people say it enough times, it might happen - eventually!

Talking about fuel have you noticed on the news the price of oil has dropped quite a lot and yet we don't see a substantial reduction in price on the pumps.Someone said recently that we pay more for our fuel then anywhere else in Europe and now rail fares are going up by 3 percent in li e with inflation.Being a public sector employee how this hurts.One piss take after another.This country really has gone to the dogs in my opinion.

can't agree with that..... the merc tourer has been a delight with not a hint of any sort of problem.... and a 40k service interval and free breakdown / repair takes the hassle out of it. obviously can't comment on other makes/ models but mine is great

in the 1960s it was proposed to end VED and add it to fuel. the main support was from the haulage (HGV / LCV) industry the opposition to it was almost entirely from motoring (car driver) organisations who for some reason thought it "unfair" on car drivers. the proposal has come up many times since and, until very recent years, the dividing lines were exactly the same... although most of heavy haulage is still in favour. I has never gained parliamentary support not surprising as most "restrictive" vehicle legislation, from speed limits onwards, were actually imposed by non-driving MPs

I grew up in london and was unusual in driving... if I was still in london I would only use public transport, despite the negative press. However I live in a village, I could never get a mortgage now in order to move into a town or city.... I drive.... I have to 7miles to the shops, 11 to the next "town" 35 to the next "proper" shopping area.. a half hour by car, 40 mins tops, to ANY of them... small A roads locally and Motorway to the 35mile place. HOWEVER... its £5+ to the shops and you cannot carry a weeks shopping on the bus (you might, I certainly couldn't) and 2 to 3 hours to the above mentioned "shopping" area public transport has dissapeared and will NEVER re-emerge in rural areas... the bus to the local towns runs all day til 11pm (10pm start to it's journey) and in the daytime rarely has more than a dozen farepayers at any point (and most of them have "free" passes) and rarely more than 3 passengers on the evening services.... it WILL disappear... it is haemoraging money

I never knew that Malcolm.Thanks for the information.It sounds about right that non driving MPS make the rules regarding driving matters.Shame we can't take the vote to the general population to decide the matter.Regards.