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What do I need to know about changes to Vehicle Tax on 1st April 2017?
The way Vehicle Excise Duty (VED) is calculated is changing for some vehicles registered from 1 April 2017. All vehicles registered before this date will not be affected.
From 1st April 2017, the first vehicle licence will be calculated on the vehicle’s CO2 emissions. The majority of vehicles will then move to a standard rate of £140 annually from the second licence. Cars with zero emissions will not pay the standard rate of vehicle tax. However, if a car’s list price is over £40,000 at first registration, the customer will pay the additional rate for five years after the end of the first licence.
How it will work
- Tax rates for vehicles registered before 1st April 2017 will not be affected by this change.
- Only M1, M1SP and M1G type approved vehicles are impacted by these changes (for definitions of vehicles included in these changes see table 1 below).
- The way in which tax is calculated for all other vehicle types will not be changing.
- All vehicles (M1, M1SP and M1G) with zero emissions will be exempt from the standard rate of vehicle tax. All other vehicles will pay a standard rate of £140 a year.
- An additional rate will be added to the vehicle tax for all new vehicles with a list price of over £40,000. This additional rate of £310 will be payable each year for 5 years from the end of the first vehicle licence. After the 5 year period the standard rate will apply.
- Zero emission vehicles will have a standard rate of £0 but if the list price is over £40,000 they will pay the additional rate of £310 a year for 5 years.
- Multi stage build M1SP and M1G vehicles without a CO2 emissions figure shown as part of the final type approval will continue to be taxed as PLG. Where there is a CO2 figure they will be taxed under the new scheme.
What this will mean for drivers?
- If a customer buys a brand new vehicle registered on or after 1st April 2017, after the first licence the majority of vehicles move to the standard rate of vehicle tax which is £140 a year.
- If the vehicle list price was over £40,000 at first registration, the customer will pay £450 a year, after the first vehicle licence. This is made up of the £140 standard rate and £310 additional rate. After five years the vehicle tax will revert to the standard rate of £140 per year.
- Vehicles with a list price exceeding £40,000 with zero emissions (including electric) will pay the additional rate of £310 a year for a 5 year period, after the first licence. After the 5 year period these vehicles will pay zero vehicle tax.
- Alternative fuel vehicles will continue to receive a £10 reduction on vehicle tax rates.
Table 1 - Vehicles included in the new scheme
| Category | Definition |
| Category M | Motor vehicles with at least four wheels designed and constructed for the carriage of passengers |
| Category M1 | Vehicles designed and constructed for the carriage of passengers and comprising no more than eight seats in addition to the driver's seat |
| Category M1 special purpose (M1SP) | Passenger carrying vehicles which are designed and constructed for special purposes. Vehicles which are type approved as M1 Special Purpose are as follows:
|
| Category M1 (M1G) | Designed for off road use and meeting designed criteria |
Table 2 - VED bands and rates for cars first registered on or after 1 April 2017
| CO2 emissions (g/km) | First year rate | Standard rate* |
| 0 | £0 | £0 |
| 1-50 | £10 | £140 |
| 51-75 | £25 | £140 |
| 76-90 | £100 | £140 |
| 91-100 | £120 | £140 |
| 101-110 | £140 | £140 |
| 111-130 | £160 | £140 |
| 131-150 | £200 | £140 |
| 151-170 | £500 | £140 |
| 171-190 | £800 | £140 |
| 191-225 | £1,200 | £140 |
| 226-255 | £1,700 | £140 |
| Over 255 | £2,000 | £140 |
*Cars with a list price of over £40,000 when new pay an additional rate of £310 per year on top of the standard rate, for five years.
