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2017 Road Tax Changes Explained

The amount of money it costs to have your vehicle on the road changes fairly frequently and there are some significant changes coming our way as of April 1st 2017. However, although the rates change often, the name for what you're paying to drive on the road seems to change even more regularly. But whether you want to call it road tax, the road fund license (RFL) or vehicle excise duty (VED), there's no avoiding it, so here's a look at how things are changing after April 1st.

The new rates were announced last year by the former Chancellor of the Exchequer, George Osbourne. The problem was that many new vehicles were now paying little or no road tax as the rates are based on CO2 emissions and manufacturers had reduced emissions to a point where they qualified for very low tax bands or were even completely exempt. To be fair, the manufacturers had done exactly what the government and the eco lobby had wanted, which was to significantly reduce the amount of carbon dioxide their engines emitted. Of course, the knock-on effect was less tax for the Exchequer, which is why things are changing again.

The really significant changes only really apply to those buying a brand new vehicle from April 1st 2017, so buyers of cars registered before that date don't have to worry. Basically, the first year will cost buyers a whole lot more and far fewer vehicles will be exempt from VED in the future. After the first year, all vehicles will then be subject to a flat fee of £140 per year, although "alternative fuel" vehicles such as hybrids and those running on LPG will pay £10 less in the first year and £130 a year thereafter.

It's really going to hurt in that first year of ownership as the substantially adjusted rates that are still going to be based on CO2 emissions will double in most cases. However, the flat rate of £140 for the subsequent years will take some of the sting out of that initial hammering for those buying cars with higher emissions. But if you think your Range Rover or Ferrari 458 will only cost £140 per year after the first year then think again. That's because all vehicles costing more than £40,000 to buy will also incur a £310 per year "supplement" in addition to the £140 VED.

At the moment for example, any vehicle with CO2 emissions of less than 130g/km pays no VED at all in the first year, and either nothing, £20, £30 or £100 per year in subsequent years depending on whether they fall into band A, B, C or D. So, at the moment, a car that falls into band C (111g/km-120g/km) will pay nothing in the first year and just £30 per year thereafter. From April 1st that will increase to £160 in the first year and £140 annually for vehicles with emissions of between 111g/km-130g/km.

At the other end of the scale, vehicles with emissions of 255g/km and higher currently pay £1120 in the first year and £515 per year from year two onwards. That's going to change to a whopping £2000 in the first year and £140 from year two onwards, or £450 per year if the vehicle costs more than £40,000 to buy in the first place.

These increases may seem high, and they are. But don't think this is going to be the end of the changes for the foreseeable future. Expect the entire VED system to be changed even more significantly in the not-too-distant future to discourage buyers from choosing vehicles with diesel engines. Yes, the same tax system that was used to actively encourage us to buy diesels will probably be used soon to do exactly the opposite, as the focus has now changed from carbon emissions to the toxic emissions that are believed to be responsible for thousands of deaths each year.

10 March 2017

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