New car taxation rules in from April 2017
New regulations come into force on 1 April, 2017. The changes were announced by former Chancellor of the Exchequer George Osborne and amount to a radical overall of the UK's system for taxing cars, known as Vehicle Excise Duty, or VED.
The new taxation rules are still based partly on car's CO2 emissions with free taxation charges for Zero CO2 emission vehicles costing less than £40,000.
Zero CO2 emission vehicles costing more than £40,000, will attract £310 premium charge per year from year 2 up to 5 years. This charge effects very few Zero CO2 emission vehicles with exception to the Tesla model range, where some would say £310 per year from year 2 is quite reasonable for a luxury car.
CO2 emission vehicles over 1 and up to 255 will all incur a standard annual road fund licence of £140 payable from year 2 in addition to a £310 premium charge per year from year 2 up to 5 years for all vehicles costing in excess of £40,000.
From April 2017 cars over £40,000 will attract a £310 premium charge per year the £40,000 is calculated from the manufactures vehicle list and option prices, and not the invoice price reflecting any discounts.
For vehicles costing less than £40,000 the main changes are that there is now a simplified annual road fund cost from year 2 of £140 per year with the exception of Zero CO2 emission vehicles which still remain at no cost. Year one takes on the cost levied on the vehicles emissions which effectively increases the on the road price of the vehicle as you move up the bands not dissimilar to the previous system.
The hardest hit cars are the lower bands under 99 CO2 emission that previously enjoyed free VED and now incur a charge from April 2017 as you can see from the bands below.
There are 13 different CO2 bands, which will determine the cost of the road fund licence for the first 12 months based the on the CO2 emission in the first year.
From April 2017 cars over £40,000 will attract a £310 premium charge per year the £40,000 is calculated from the manufactures vehicle list and option prices, and not the invoice price reflecting any discounts.