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In the 2015 Budget Statement it was announced that from 1 April 2017 the Vehicle Excise Duty (VED) will be reformed in order to create a simpler method with standard rates. The new tax will only affect brand new cars registered on or after 1 April 2017, while tax rates for all vehicles registered before this date will not be affected.
For new vehicles registered on or after 1 April 2017, first year vehicle licence rates will be based on carbon dioxide (CO2) emissions of the vehicle, according to different CO2 ranges compared to current ones. For subsequent years and also if the registered keeper changes, a flat Standard Rate (SR) of £140 will apply unless the vehicle has zero emission, in this case the rate will be £0.
Vehicles over 40,000
For vehicles with a list price over £40,000 at first registration, there will be a supplement of £310 per year in addition to the standard £140 VED cost, a total cost of £450.
This will be in effect for the first five years of the car’s life. After five years of the surcharged rate (£140+£310), the vehicle tax will revert back to the standard rate of £140 a year. Any additional charge will also be applicable if the keeper is changed within the first five years.
This (VED) tax change has been driven by the HMRC in order to generate additional taxes as many customers have acquired lower C02 cars over the last 10 years, thereby reducing tax revenues to the Government. Now all cars except Zero Co2 emissions vehicles and fully electric vehicles will pay a minimum rate of £140 per year.
Since November 2015, the NFDA and car manufactures have worked with the DVLA to ensure the changes are introduced in a timely way and to minimise the effect on customers and dealers.
The NFDA & SMMT have lobbied for the list price to be based on the retail price plus factory options including delivery charges, but not dealer-fit accessories, PDI’s and tax to DVLA.
The list price of the vehicle is defined as the manufacturer’s recommended retail price prior to any dealer discounts. This would allow manufacturers to build the price into the AFRL system for registrations. This price will be based on the list price for the car published in the 24 hours prior to the registration.
Dealers and manufacturers who allow ‘price protection’ for their customers, cannot price protect the VED rate, these customers will pay the correct value rate on the date of registration.
In case of advance registrations, the price is recorded as the list price on the day before the advance registration is submitted to DVLA.
For Example: if an advance registration is submitted on the 15th of the month, then the list price will be the price on the 14th of the month (I.e., the day before the advance registration is submitted to DVLA). The vehicle tax would start from the 1st of the following month.
How does this affect your dealership
Current VED rates are cheaper for most customers and therefore there will be an incentive for them to register new cars before 1 April 2017. It is important that sales executives explain new rates to customers and do not promise deliveries prior to April if this deadline cannot be met perhaps because of supply delays. A customer who is promised a March delivery, but does not receive the vehicle until April, could ask for compensation for the additional VED which is to be paid over the next three to six years or cancel the order.