NI 47 - Vehicle Excise Duty: Small car buyers face higher costs

Post date: 18-Mar-2017 15:50:47

The way we pay road tax will change significantly from 1 April and it is something to consider if you're going to be buying a new car.

Crucially, it is those buying cars with low CO2 emissions that face the highest relative rise in the tax.

Currently many such vehicles don't incur the charges, known formally as Vehicle Excise Duty (VED).

But for cars registered on or after 1 April 2017 there will be a first year of charges linked to carbon emissions.

After that there will be three bands - zero, standard and premium - determining how much you will pay as a car owner each year.

Importantly, if you have a car already, these rule changes do not apply and you will continue to pay VED under the existing rates.

What are the changes?

The changes, announced in the July 2015 Budget, reflect the fact that car manufacturers have cut many car models' CO2 emissions.

This means their owners benefit from the existing VED bands that tax lower-emissions vehicles more lightly.

As more cars get cleaner, the existing rules have cut back the Treasury's income - hence these changes. From 1 April onwards, only newly registered cars with zero emissions will escape VED - so that means electric and hydrogen cars only.

There is a sliding scale of charges for the first year of ownership and after that petrol or diesel vehicles are subject to a "standard" rate of £140 a year.

road tax for 2017

For those buying cars costing more than £40,000 there will be an additional £310 "premium" levy for the first five years of ownership.

What about older vehicles?

Cars registered before 1 April, 2017 are not affected by the VED changes - so for existing car owners, you will pay as before.

If your car has an engine capacity of less than 1549cc (about 1.5 litres), then you will still pay £145 (if you pay upfront).

If you car has a bigger engine, then the annual charge is £235. Both these figures rise slightly if you pay in instalments. You can get a detailed breakdown here.

If your vehicle was registered after 1 March 2001, then it is emissions that determine how much you currently pay.

Vehicles have to be in Band D (emitting 121-130g/km of CO2) before you pay any significant annual road tax - in the case of Band D it is £110 a year.

What if I'm buying a second-hand car?

The VED changes do not apply to cars that are already on the road, so if you're buying a second-hand car then your vehicle will be taxed under the old system.

However, one wrinkle to bear in mind is that since the end of the paper tax disc in 2014 it is no long possible to transfer this tax between car owners.

As soon as the car is sold the seller should complete the "new keeper" bit of the car's registration document - the V5C certificate - and send it to the DVLA. You, as the new owner, keep hold of the green bit.

You can tax the car immediately online or over the phone with the DVLA, or at a post office. The seller gets a refund of unused tax from the DVLA.

Source: BBC News Reporting

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