January 31, 2017, 10:07 pm
*cost calculated over 1st 5 years ownership
Beginning 1 April 2017, people who purchase a brand new car will face higher road tax unless they purchase a vehicle with no tailpipe emissions. The new tax rate is dependent of level of emissions and the changes to the road tax will not affect people who bought a car that was registered before 1 April 2017. Plus those who buy a brand new car priced more than £40,000 will pay an additional £310 per year, for the next 5 years.
First Year's Vehicle Excise Duty (VED) / Car Tax For New Cars On & After 1st April 2017
The amount you pay each year after that depends on the type of fuel the vehicle uses.
And if your car is over £40,000, be prepared to pay the following supplementary /additional rate for the next 5 years.
Drivers of zero emission vehicles will be exempt for the road tax. Drivers of cars that cost more than £40,000 will pay higher VED rates. Drivers who have cars costing over £40,000 will pay an additional £310 for the first five years. (2) If a car buyer purchases a car that is priced under £40,000 but then adds options that increase the price to over £40,000, the car buyer will need to pay the supplemental £310 annual tax. (3) However, if the buyer negotiates a lower price on a car with a list price of £40,000 or more, the driver still needs to pay the £310 supplemental tax since the list price was higher. (3)
The new VED annual rates will fall into 3 categories only. Drivers either pay £0 for zero emission vehicles, £140 standard rate, or £450 for cars that cost more than £40,000. (4) What will this mean for new car buyers in 2017?
The changes largely affect drivers of low-emission vehicles and high ticket vehicles. Under the current VED rates, cars with low emissions were exempt from the VED taxes. Drivers of hybrid vehicles with low emissions enjoyed a £0 VED. However, the new rates mean that only electric or hydrogen cars with zero emissions qualify for that tax exemption. Low emissions vehicles will cost the same standard annual rate as other vehicles. Car buyers who are interested in purchasing a hybrid vehicle that costs less than £40,000 can still secure that £0 VED if they purchase the vehicle before 1 April 2017.
After 1 April 2017, any vehicle that costs £40,000 or more will need to pay the annual £310 tax supplement even if the vehicle has zero emissions. (4) Tesla Model S with zero emissions will cost buyers £310 a year for VED after 1 April 2017 even though it was exempt from VED before the tax changes take effect. (4)
The Audi A7 3.0 cost a relatively low VED under the current rates thanks to its low emissions of 128g/km. (4) Since only zero emissions vehicles have a free pass on VED and others cost the standard or premium VED rates, the buyers after April will end up paying £1860 more in six years than those who purchase the same vehicle before April. (4)
A Land Rover Discovery SDV6 SE has a list price of £41,600, thus incurring the supplemental VED rate if purchased after April. (4) Car buyers who purchase this 4x4 on 1 April 2017 or later will pay £1360 more in VED over six years than those who bought this vehicle under the current VED system.
Car buyers wanting to buy a car that has 140 g/km or less would have a lower VED before 1 April 2017 than if the car was registered after the new tax laws take effect. (1) For example, a car with a 140 g/km emission rate would cost £130 initial rate and £130 annually under the current system. Under the new system changes, the same vehicle would cost £200 for the first year rate and £140 per year plus an additional £310 annual supplement for five years if the car costs £40,000 or more. (1)
Drivers with cars with very low emissions rates of 101-110 g/km only pay a small amount under the current system. The first year rate is £0 with an annual VED of only £20. (1) This is much less than the £140 standard annual VED rate that will be required under the new system. Therefore, it makes sense for drivers who want a low emission vehicle that would cost higher VED under the new system to purchase the vehicle before April 2017.
If the car that the buyer wants to purchase has a high emissions rate, the buyer may save money by waiting to purchase the vehicle until after 1 April 2017 unless that vehicle costs over £40,000 or the driver doesn’t want to keep the vehicle for many years. (1)
A vehicle that costs under £40,000 and has 201-225 g/km CO2 emissions would cost £650 for the first year in VED and £295 annually under the current system. That same vehicle purchased on or after 1 April 2017 would cost £1,200 for the first year and £140 annually under the new VED system. So, the buyer would have to pay more upfront, but may save money if they intend to keep the vehicle for at least six years.
Any car buyer looking to purchase a vehicle for over £40,000 is likely to save money by buying the vehicle before 1st April 2017 unless the vehicle has one of the highest emissions ratings and the buyer wants to hold onto the vehicle for a long period of time.
*cost calculated over 1st 5 years ownership
1 "New VED Road Tax: Do You Have All The Facts On The 2017 UK Car Tax Changes?". Auto Express. N. p., 2017. Web. 5 Jan. 2017.
2 "Vehicle Excise Duty - GOV.UK". Gov.uk. N. p., 2015. Web. 5 Jan. 2017.
3 "Car Tax Changes In 2017 – What Do I Need To Know?". What Car?. N. p., 2017. Web. 5 Jan. 2017.
4 "Budget 2015: New VED Bands To Be Introduced From 2017". Honest John. N. p., 2015. Web. 5 Jan. 2017.
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