In 2017, major changes are being introduced to Vehicle Excise Duty (VED), also known as car tax or road tax. These car tax changes are going to affect buyers of new cars in the future for a long time.
Any vehicles registered before April 2017 will not be affected, and will continue to operate under current car tax rules. But if you buy a new car from this month onwards, then it’s a different story.
Here’s our guide to what you need to know about the new car tax rules for 2017.
What are the changes to road tax?
The changes to Vehicle Excise Duty from April 2017 onwards were announced by George Osborne back in 2015 and they’re designed to reflect progress in emissions technology.
The biggest differences can be summarised like this: owners of new cars which emit a small amount of CO2 will start paying considerably more for tax than before. There is also a new flat rate which is being consistently applied across virtually all tax bands and an extra charge may be applied depending on the value of your new car.
Prior to April 2017, any new car with a CO2 emissions output below 100g/km has enjoyed the luxury of being in the lowest tax band, meaning the owner pays nothing. However, under the new rules, only cars with zero CO2 emissions will be exempt from paying car tax.
How much you pay for road tax has previously been determined by CO2 emissions each year, but under the new tax bands, only the first year is based on this factor. The rates you pay based on CO2 emissions (now for the first year only) have been adjusted and are costlier than before.
For petrol and diesel cars, the amount of tax you pay after the first year of ownership will be a flat rate of £140 annually. This is reduced slightly to £130 a year for alternative fuel vehicles – which covers hybrids, range extenders etc. If a new car is registered before 1st April, road tax will remain free for each year of ownership.
The only way then to avoid having to pay road tax on a new car registered from April 2017 onwards will be to get a fully-electric vehicle.
Another major change to the car tax rules in 2017 applies to new vehicles with a list price of over £40,000.
If a new car costs over this amount, the rate of tax is still based on CO2 output the first year and then a fixed rate determined by the type of vehicle in following years. But after the first year of ownership, an additional annual rate of £310 for the next five years will be applied.
After those five years, only the standard rate (determined by the type of vehicle you have) will be applied. This new rule does mean though that it’s possible that certain electric car owners could end up paying money towards road tax for a period of time if the list price is high enough, even though it won’t emit any CO2.
How will the new car tax prices affect me?
How much the changes to Vehicle Excise Duty/car tax will affect depends on your current circumstances and future plans. If you already own a car before April 2017, then the amount you are paying towards car tax will not change at all, your car will continue to follow the same rules that were in place at the time it was first registered.
If, however, you were planning on buying a low-emission new car sometime in the future (during April onwards), then the new tax rules are a blow. Getting something which emits below a certain amount of CO2 will no longer be enough to avoid having to pay for road tax. Many more new car buyers will be paying a certain amount towards road tax this year than compared to other recent years.
For motorists who get a new car which emits enough CO2 for it to fall under a higher car tax band, there are positives and negatives. The new flat rates mean owners of cars in these higher tax bands will actually pay less than before after the first year, but the fee in the first year will be a lot more comparatively.
So, as an example, a petrol-run car which emits 171g/km will be charged £800 in tax for the first year of ownership, whereas £300 would have been paid under the previous tax rules. For every year of ownership after the first, £140 will be paid towards tax, reduced from £210 under previous rules.
What will my car tax be in 2017?
The simplest way to figure out what you’ll be paying towards car tax on a vehicle registered from April 2017 onwards is to look at a table displaying the first-year rates and standard rates applied to each tax band.
As mentioned above, any car you own which was registered before April 2017 will follow the same tax rates which existed at the time of its registration.
Road Tax Bands 2017
The table below shows the first-year and standard tax rates applied to newly registered cars under UK car tax bands from April 2017 onwards:
| CO2 output | First year rate | Standard rate |
| 0g/km | Free | Free |
| 1-50g/km | £10 | £140 |
| 51-75g/km | £25 | £140 |
| 76-90g/km | £100 | £140 |
| 91-100g/km | £120 | £140 |
| 101-110g/km | £140 | £140 |
| 111-130g/km | £160 | £140 |
| 131-150g/km | £200 | £140 |
| 151-170g/km | £500 | £140 |
| 171-190g/km | £800 | £140 |
| 191-225g/km | £1,200 | £140 |
| 226/255g/km | £1,700 | £140 |
| over 255g/km | £2,000 | £140 |
For more information about how VED tax bands work, you can check out our separate guide about the relevant rules here.