Under the new rules, which are being introduced in April 2017, drivers are going to be hit in the pocket because it will cost significantly more to tax some models of car each year – and only electric and hydrogen cars will be exempt,.
The proposals were first announced by former chancellor George Osborne two years ago to reflect changes in emissions technology in newer cars.
Here’s what you need to know about the changes …
Why is this change being made?
The current structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178 gCO2/km.
The Band A threshold of 100 gCO2/km below which cars pay no VED was introduced in 2003 when average new car emissions were 173 gCO2/km.
Since then, to meet EU emissions targets average new car emissions have fallen to 125 gCO2/km.
This means that an increasingly large number of ordinary cars now fall into the zero- or lower-rated VED bands, meaning they pay no tax at all.
How will you be affected?
This only affects cars registered on or after April 1, 2017. It will affect new and used cars that are registered on or after that date.
Under the new rules – only electric and hydrogen cars will be exempt – and all other new cars will pay a flat rate of £140.
A car emitting 99g/km bought before April 1 will be free of road tax for life.
Those bought after the date will cost £120 in the first year, and £140 a year thereafter.
Car tax rate explained
|New VED system – for cars registered from 2017|
|Emissions (g/CO2/km)||First year rate||Standard rate|
Cars emitting 131g/km will be taxed £200 instead of £130, those emitting 151g/km will be charged £500 instead of £180, those emitting 171g/km will be charged £800 instead of £295, and those emitting 191g/km will be charged £1,200 instead of £490.
The highest possible charge will continue to apply to those emitting over 255g/km, but that will rise from £1,100 to £2,000.
However, those buying high-polluting cars may even break-even, with tax set higher in the first year and subsequently falling every year after that.
What about expensive but low-emission cars?
It will be even worse for those who want to buy luxury or low emissions cars. Currently, they are tax free but the cost will rocket to £310 a year from the second year of operation.
Cars worth more than £40,000 that produce emissions will have to pay £450 a year in years 2-6.
What can you do now?
James Hind, founder of the car buying platform, says: “Some models will cost significantly more to tax each year, so there are long-term savings to be had by buying before the new system kicks in.
Hybrid cars and small petrol-powered city cars will be cheaper to tax if you buy before April 1.”
If you are unable to buy your low-emissions car before April, then it is worth considering a nearly-new car, which will continue to be taxed under the old system.