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2017 Road Tax Changes - What you need to know

From 1 April 2017, Vehicle Excise Duty – commonly known as road tax – is set for some major changes. If you’re looking to buy a new car in 2017, you really need to know about these and how they might affect you. First things first – if you own a car registered before 1 April 2017, the changes don’t affect you. Whilst there’s good news for some, the majority of drivers could be left out of pocket.


So, why the change? Cast your mind back to summer 2015, when the Chancellor of the Exchequer announced an overhaul of the current system. According to then Chancellor, George Osborne, the changes are required to fill a hole in the Treasury’s coffers. Basically too many people are buying too many super-efficient petrol and diesel cars, and with a taxation system based on CO2 emissions, the government has been left out of pocket. Indeed, Osborne claimed that, under the current system, 75% of new cars would be eligible for free road tax by 2017.

The rate of Vehicle Excise Duty (VED) will still be split into 13 bands and calculated on a vehicle’s CO2 emissions. Only cars with 0g/km CO2 emissions will be eligible for free road tax.

Currently, new cars emitting less than 130g/km CO2 have been tax exempt in the first year, and subject to a sliding scale of taxation for each year thereafter. From April 2017, the cost will rise considerably. Not only will you pay up to £160 in the first year, you’ll also pay £140 in the second year and each year thereafter. So at the end of year three you’ll have spent £440 on tax – £400 more than if you bought the same car a month earlier. This looks to be good news for potential buyers of high emission cars, as using the new system you’ll have to find £2,000 for the first year, but the second year rate drops to the standard £140. Keep the car for a few years and you’ll be quids in. But there is a catch......

From April, all vehicles with a list price of over £40,000 – including zero emission cars – will attract an additional rate of £310, payable each year for five years from the end of the first vehicle licence. At this point it drops to the standard rate. Which means a Tesla Model S will cost £310 a year – a big shock for those who might be expecting free road tax.

The big question is, is it worth buying a car before April 2017? Well, if you’re in the market for an efficient petrol, diesel or hybrid vehicle, it’s almost certainly worth registering it before the end of March. Indeed, industry experts are expecting one of the busiest months on record, as buyers also rush to grab a car with a new 17-plate.

The case isn’t quite as clear cut when it comes to the least efficient vehicles, and much will depend on how long you intend to keep the car. There’s also the penalty for £40,000 cars to take into consideration. But don’t think you’ll be able to escape the £310 fee by negotiating the price down below £40,000. The government will use the published list price. Go easy on the options, too, as these could push your car beyond the £40k mark.

For the option of Leasing a car, which includes the Road Tax for the term of the contract, this new system will also have a big consequences for you to consider. This extra cost for the "High Value" vehicles has to be covered by the monthly rentals so on a 3 year contract the monthly rental could increase by approx £30+vat per month.

The best advice would be that if you are considering a car change soon then look at the figures now to make an educated decision on whether it is worth getting the deal sorted and the car regisitered before the 31st March 2017.

For full impartial advice and comparison figures please do not hesitate to contact the team at Genus Leasing on 01284 810467 or Contact Us

Check out our table below to explain the changes;

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Posted on 18th January 2017 at 1:32 PM

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