In 2015 the Government announced that the way in which they charge Vehicle Excise Duty (VED) – also known as Road Tax, Car Tax, Road Fund License (RFL), the Tax Disc, Car duty – would change from 1st April 2017. This is known as ‘VED Reform’ and the DVLA will implement the change for all new car registrations from 1st April 2017.
- It will NOT apply retrospectively to vehicles registered before that date
- It will NOT apply to other vehicle types, e.g. Commercial Vehicles, Motorbikes, HGVs.
Current VED Rules
- Currently, VED is based on the CO2 emissions of the vehicle
- The higher the CO2 emissions of the vehicle the more VED is due
- There is one rate for the first year (First Licence Rate) and another for the second and subsequent years (Standard Rate)
- The Standard Rate, like the First Licence Rate also increases with CO2 emissions.
New VED Rules
- From April 2017, the First Year Licence rate of VED will continue to be related to the CO2 emissions of the vehicle but the bands will change and rates due will increase.
- In the second and subsequent years the ‘Standard’ rate of VED will no longer be related to CO2 but will be related to the list price of the vehicle
- For vehicles with ‘List Price’ of £40,000.00 or less, the rate will be £140
- For vehicles with ‘List Price’ over £40,000.00, an ‘additional rate’ of £310 (a total of £450) will be due for 5 years from end of the First Year Licence
- After the additional rate expires the £450 will revert to £140, or whatever the prevailing rate is at the time.
What about cars that are already registered?
If you buy your car before 1 April 2017, you won't be affected by these changes, because they only apply to cars registered on or after that date. Your tax will continue to be calculated using the old system of CO2 emissions, meaning that in the vast majority of cases you'll be better off.
So, how much worse off will you be if you buy a car under the new tax system? What Car? has worked out the costs over three years for some of the UK's most popular models, as well as for some of our What Car? Award winners from 2016. Click through to the next page to view the results.