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How do the new car tax rules work?Back

On the 1st April a new set of rules for Vehicle Excise Duty (VED), the tax imposed on new cars, was introduced, but many motorists are still finding it hard to understand how it all works.

The new rules have increased costs for VED car tax bands which could mean that some motorist’s car tax will leap up in price, whereas some might actually pay less than they did before. Electric and plug-in hybrid cars remain the cheapest to tax, while petrol and diesel cars are now much more costly to get on the road.

Below, Trusted Dealers offers a short guide to understanding the new car tax system and how it could affect motorists.

What will I pay in the first year?

When you purchase a new car, the VED for the first year will continue to be based on CO2 emissions with 13 different bands. However, unlike the old system where low emission petrol and diesel cars were exempt from car tax, it is now only free for zero-emission cars such as electric and hydrogen powered vehicles. Hybrid cars will be priced depending on their level of emissions, however low they might be. Below is a table detailing the first tax payment you’ll pay for the first 12 months when you register your new vehicle:

CO2 emissions (g/km) Petrol (TC48) and diesel cars (TC49) Alternative fuel cars (TC59)
0 £0 £0
1 – 50 £10 £0
51 – 75 £25 £15
76 – 90 £100 £90
91 – 100 £120 £110
101 – 110 £140 £130
111 – 130 £160 £150
131 – 150 £200 £190
151 – 170 £500 £490
171 – 190 £800 £790
191 – 225 £1,200 £1,190
226 – 255 £1,700 £1,690
Over 255 £2,000 £1,990


What will happen to car tax after the first 12 months?

After the first 12 months, the car tax you’ll pay will be based on the type of vehicle you drive. For standard petrol or diesel vehicles, the fee will be a flat rate of £140 per year, while an alternative fuelled car such as a hybrid, will now only be £10 cheaper to tax at a yearly rate of £130. Zero emissions cars will remain free. In addition, ff you own a car that cost over £40,000 new, you will now be hit with a five-year supplement of £310 per year. After the first five years, the road tax reverts to the standard rates as above.

How will car tax effect new cars?

Before April 1st, new cars with low CO2 emissions were exempt from tax which made them a more attractive option, but under the new rules it is very likely that new cars will become significantly more expensive to tax in the first year. In addition, buyers of new zero emissions cars that cost over £40,000 will still be expected to pay a five year supplement, while buyers of new high performance cars will more than likely benefit from the new flat rate.

What if I bought my car before April 1st 2017?

As long as your new car was registered with the DVLA before 1st April 2017 then the changes shouldn’t affect you, and you should continue to pay the current VED rates which are much more favourable towards lower-polluting vehicles. If you have any doubts, please refer to the Government’s official vehicle tax rates table by clicking here.

Are there any new road tax changes from April 2018?

Yes, it was announced in the Autumn Budget 2017 that any new diesel cars bought from April 2018 will be subject to increased first year VED road tax rates if they don’t meet the Euro 6 emissions standards, both in the laboratory and in “real world” testing.

Which new car buyers will be most affected?

Smaller, more economical cars will be most affected by the new car tax changes, with some owners set to pay up to nine times more than they would have under the old system. Buyers of higher polluting cars stand to save money in the long run across several years of ownership.

Posted by Leana Kell on 24/11/2017