2017 sees new rules for Vehicle Excise Duty (road tax) coming into effect and it’s a mixture of good and bad news depending on which car you plan to drive after the 1st April.
The changes were set in motion by George Osbourne, the former Chancellor of the Exchequer, as a response to falling CO2 emissions levels from new cars in the UK. Currently most new cars are paying little to no tax, which is costing the treasury millions. To counteract that, new cars will be subject to higher tax prices in their first year of registration and a flat rate of £140 for most cars thereafter.
If you’re in the market for a new car, the question to ask yourself is should I wait for the new rules to kick in or make my purchase now? Well, the answer depends on what you’re looking at buying. Under the current scheme, low-emission petrol and diesel cars are tax exempt, but this will change after April 1st. Beyond this date, only vehicles with no tailpipe emissions (electric and hydrogen), will pay zero road tax. It’s important to point out that these changes will not be applied retrospectively, so don’t panic if you already own a vehicle in this category.
To give examples, a current owner of a Peugeot 208 1.2 PureTech pays £20 a year; this will increase to £140 from April. So, if you were looking at buying this model, it would make more sense to buy it before the change. At the other end of the spectrum, the less environmentally-friendly Honda CR-V will see an increase from £300 to £800 on its first-year tax, but after that the annual bill will decrease by £70 from the current £210. Across three years of ownership, that equates to a tax rise of just 50 per cent. Compare that to the Peugeots increase of 950% (!) and it’s worth looking at buying the Honda after April 2017.
Other changes coming in affect cars valued at over £40K. There will be a five-year supplement of £310 per year to pay, as well as the £140 rate from year two. This means that expensive, zero-emissions cars will no longer have a free ride. Other cars in the £40K + bracket will pay £450 a year (£310 + £140) for five years, after which it will revert to £140.
In summary, the popular eco-friendly cars are being targeted so don’t delay if you’re thinking of buying one. From being tax-exempt under the current rules, you’re looking at costs of £400 over three years, £600 over five and £1,380 over 10 if you purchase after the changes come in. On the other hand, if you have your eye on something a bit more sporty with higher emissions, this is music to your ears. You’re in line to save close to £600 if you keep the vehicle for five years, or nearly £2500 over 10 years.
And in regards to the £40K + category, unless your car of choice emits more than 226g/km and you intend to keep it for the best part of ten years, you’ll be worse off after 1st April.