A simples guide

Car tax changes… coming to you in 2017

From the 1st of April 2017, car tax rates in the UK will change for all new cars registered. If you’re thinking of buying a new car, you might want to take these changes into account when planning your purchase.


What’s changing?

In moves that will boost the Chancellor’s coffers, many buyers could see an increase in their first year car tax. In addition, previously exempted low CO2 emitters will now find themselves caught by the new rates as the tables below demonstrate.

VED tax bands: April 2017 onwards

Emissions (g/km of CO2) First year rate
0 £0
1 - 50 £10
51 - 75 £25
76 - 90 £100
91 - 100 £120
101 - 110 £140
111 - 130 £160
131 - 150 £200
151 - 170 £500
171 - 190 £800
191 - 225 £1,200
226 - 255 £1,700
Over 255 £2,000
hand on steering wheel

What happens in year two?

Currently rates are staggered depending on the cars emissions, with those emitting below 120g/km of CO2 eligible for car tax of less than £50 a year.

From April 2017, while zero emission vehicles will be tax free, all other vehicles will pay a flat fee of £140.

There’s an additional supplemental charge that you need to consider if you’re buying a car for more than £40,000. In addition to the £140 standard rate, you’ll also have to pay an extra £310 for a further five years. This means your car tax will be £450 from year two until your car is six years old.

So everyone loses?

Well not necessarily. Certainly buying a low emission car is no longer going to yield the tax benefits it does today. Let’s look at an example involving buying two quite different new cars:

Firstly, a Suzuki Celerio, a 1 litre city car with low emissions of only 99 mg/km of CO2. Under existing rules, the car is exempt from car tax. From April 2017, it would cost you £100 in year one and £140 thereafter. That’s £1,360 if you kept the car for 10 years.

Now let’s imagine buying a tax band L car such as a Nissan 370 Z. Costing around £28,000 its 3.7 litre engine emits 248 m/km of CO2. While you’ll still pay more than you would with the Celerio, you’ll pay considerably less than under existing rules.

Under current rules you’d pay £870 in year one and £490 each year afterwards. Under the new regime in April you’d pay a much larger £1700 in year one, but then only £140 each year afterwards. That means if you buy a new Nissan in April 2017 you’d pay £ 2,960 car tax over 10 years as opposed to £5,280 if you brought one today.

If you’re thinking about buying a new car today you might want to think seriously about the car tax implications of your purchase. For a low emission car it probably makes sense to purchase it before the new rates come into effect in April. If your new car is in a higher band, and you’re planning to hold onto it for a while, you’d probably benefit from doing the maths to see if you want to defer the purchase until next April.

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