Changes to Vehicle Excise Duty

motorway

The way road tax, or Vehicle Excise Duty (VED), is calculated is changing for cars registered from 1 April 2017. Commercial vehicles are not affected.

What is changing?

In essence, the current CO2-based bands are being reformed with fewer cars exempted from the £0 Vehicle Excise Duty band.

From 1 April 2017 Vehicle Excise Duty will be split into two rates: First Year Rate and Standard Rate.

The First Year Rate (referred to as the first licence period) is still based on a graduated table of CO2 emissions, with cars falling into bands, from £0 for cars with zero emissions, all the way up to £2,000 for vehicles with CO2 emissions above 255g/km.

However, after the first year, cars will move into a second licence period known as the Standard Rate. All cars, other than those with zero CO2 emissions, are required to pay a yearly standard rate of £140.
There are some exceptions to this standard rate. Cars costing over £40,000 when first registered (which also includes zero emitting cars) are subject to a different Standard Rate for the next five years following the first licence period.

What are the new rates?

First off, it’s important to note that cars and commercial vehicles registered before 1st April 2017 are not affected by these changes.

If a new leased vehicle is registered on or after 1st April 2017, the VED for the first year will be calculated based on the CO2 emissions of the vehicle (see table). After the first year the majority of vehicles move to the standard rate of VED which is £140 a year.

Exceptions to the standard rate:

  • If the vehicle has zero emissions and a list price (P11D) below £40,000 at first registration VED will be levied at £0 a year for the next five years, and every year thereafter.
  • If the vehicle has zero emissions and a list price (P11D) over £40,000 at first registration VED will be levied at £310 a year for the next five years. This is made up of the £0 standard rate and £310 additional rate. After five years VED will revert to £0.
  • If the vehicle list price (P11D) is over £40,000 at first registration VED will be levied at £450 a year for the next five years. This is made up of the £140 standard rate and £310 additional rate. After five years VED will revert to the standard rate of £140 per year.
  • If the vehicle is alternatively fueled it will continue attract a £10 reduction on VED.

VED Bands (2017)

Emissions (g/km CO2)

First Year Rate Standard Rate
0 £0

£0*

1-50

£10 £140*

51-75

£25
76-90

£100

91-100

£120
101-110

£140

111-130

£160
131-150

£200

151-170

£500
171-190

£800

191-225

£1,200
226-255

£1,700

Over 255

£2,000

*After the first year, cars with a P11D value over £40,000 pay an annual supplement of £310 for five years.

How might this affect you?

When a vehicle is leased, the VED is included in the monthly payments.

If the vehicle is registered after 1 April 2017, the VED rate used to calculate the monthly payments may change (refer to the table above). The actual registration date depends on the dealership supplying the vehicle, but typically a vehicle is registered on the day it is delivered. If, due to manufacturer issues, a vehicle delivery scheduled for before 1 April 2017 is delayed beyond this date, the monthly payments may change.

If you have any questions, or require further clarification, call or email us.