In the first year, car tax will be calculated by CO2 emissions, the same as today. But from the second year onwards, there will be three categories that define how much you will need to pay.
At the moment, new car buyers with CO2 emissions below 130 g/km are benefitting from a first year free of tax, with sub-100 g/km emitters continuing with the free tax.
Current VED
As of April 2017, first year tax is only free to those who purchase all-electric vehicles with zero emissions. This is where the CO2 grouping carries over, although category ranges will differ.
2017 VED
It's year two onwards that causes the most confusion. The three categories are as follows:
- Zero emission vehicles under £40,000
- Standard vehicles under £40,000
- Premium vehicles costing over £40,000
The standard rates for year two and onwards are as follows:
- Zero emissions - £0
- Standard vehicles with CO2 emissions of 1 g/km and above - £140
- Premium cars - any cars costing more than £40,000 - add an extra £310 to the £0 or £140
That makes all-electric cars costing less than £40,000 free to tax in year two, whereas premium electric cars that cost £40,000.01 and above will have a year two rate of £310.
Standard cars under £40,000 will pay a fixed rate of £140 a year, regardless of emissions. But buy a CO2-emitting car that costs over £40,000 and you'll have the hefty annual sum of £140 + £310 (=£450).
There's another catch, in case this isn't confusing enough! The premium fee disappears after 5 years, which makes any car that costs over £40,000 go back down to £0 (zero emissions) or £140 (emitter) a year.
Let's take a look at some examples:
Category 1 - Nissan LEAF
Year 1 - £0
Year 2 - £0
Year 3 - £0
Year 4 - £0
Year 5 - £0
Year 6 - £0
Year 7 - £0
Year 8 - £0
Year 9 - £0
Year 10 - £0
Total - £0
Category 1 & 3 - Tesla Model S
Year 1 - £0
Year 2 - £310
Year 3 - £310
Year 4 - £310
Year 5 - £310
Year 6 - £310
Year 7 - £0
Year 8 - £0
Year 9 - £0
Year 10 - £0
Total - £1,550
Category 2 - VW Golf 1.4 TSI 125 PS Manual (120 g/km)
Year 1 - £160
Year 2 - £140
Year 3 - £140
Year 4 - £140
Year 5 - £140
Year 6 - £140
Year 7 - £140
Year 8 - £140
Year 9 - £140
Year 10 - £140
Total - £1,420
Category 2 & 3 - Mercedes CLS 400 (167 g/km)
Year 1 - £500
Year 2 - £450
Year 3 - £450
Year 4 - £450
Year 5 - £450
Year 6 - £450
Year 7 - £140
Year 8 - £140
Year 9 - £140
Year 10 - £140
Total - £3,310
Extreme Category 2 & 3 - Bentley Bentayga 6.0 W12 (296 g/km)
Year 1 - £2,000
Year 2 - £450
Year 3 - £450
Year 4 - £450
Year 5 - £450
Year 6 - £450
Year 7 - £140
Year 8 - £140
Year 9 - £140
Year 10 - £140
Total - £4,810
To conclude, any car that is free to tax today will probably not be free if bought new in 2017, unless you're already driving a zero emissions vehicle. In which case, I commend you for your braveness. Additionally, cars that have just started doing well like the Tesla Model S will cost you a lot more in tax than cars that emit significant amounts of CO2. It seems unfair that people who will try and help the environment but want to keep on to their high standards are being penalised.
In order to avoid the somewhat confusing proposed 2017 VED system, you could buy a new 17-plate car any time in March and pay the current road tax figures. But inevitably, the 2017 system will be followed by thousands.
Check the information out for yourself first hand at https://www.gov.uk/government/publications/vehicle-excise-duty/vehicle-excise-duty
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