What you need to know about car tax changes in 2017

Car taxation has changed, with a radical revamp which went live on 1 April. A very suitable date some might feel, particularly those who are going to be hit for many hundreds more

Car tax, or Vehicle Excise Duty (VED), is still based partly on the CO2 emissions but now the benefit of buying a low-emission car has been partially eroded. As before, there are 13 bands and how much tax you pay in the first year depends on which band the new car comes in. If you want to pay nothing then you now need to have car that emits nothing, that is a car with zero CO2 emissions.

That’s basically electric cars only, and if they cost less than £40,000 they’ll continue to pay no tax. If you have a petrol or diesel car costing under that £40k limit then you’ll pay a flat rate of £140 per year. Hybrids cost a tenner less per year.

However, if your car cost over £40,000 then from years two to six you’ll be paying yet another tax, a ‘premium tax’, of £310 a year on top. Which means buying an expensive (£40k+) pure electric car isn’t quite the cheap option it was in terms of tax.

And there’s a caveat. That £40,000 limit isn’t just the list price, it’s what your particular car with options ends up costing. So if you buy a car for £38,000 but then spend another £3000 on options, you’ve just slid into the higher premium tax band. That list price includes delivery, plates and fuel but doesn’t include the fee for new car registration.

Note it doesn’t matter if your particular car came in under the £40k limit because you wangled a hefty discount. If the list price puts it over £40k, you pay the tax.

The reality is that previously VED-free cars, like the Nissan Qashqai 1.5 dCi, which emits 99g/km of CO2, will now cost an extra £400 over three years. That driver won’t get much sympathy from the owner of a new Range Rover Sport 3.0 SDV6. Before the cost over three years for VED would have been £815. Now it will be £1700.

If you buy an electric car like a Renault Zoe or a Nissan Leaf then you’ll still be paying no tax, but an expensive electric car like a Tesla Model S will now attract that premium tax.

One outcome is that it makes cars registered before April 1 2017 more attractive, even if under the old regime they were relatively high emitters of CO2. They will continue to be taxed under the old rules, For example a big gas guzzler emitting over 255g/km of CO2 would now pay £2000 in the first year, whereas an older model with the same emissions would still cost £515 a year.

While you’re mulling that over, here are the costs that came into force on 1 April this year.

VED car tax bands for cars registered on or after 1 April 2017

Emissions (g/CO2/km)	First year rate	Standard rate*
0	£0	£0
1-50	£10	£140
51-70	£25	£140
76-90	£100	£140
91-100	£120	£140
101-110	£140	£140
111-130	£160	£140
131-150	£200	£140
151-170	£500	£140
171-190	£800	£140
191-225	£1200	£140
226-255	£1700	£140
over 255	£2000	£140

*Cars costing more than £40,000 pay a £310 supplement for years two to six inclusive

Graham Scott is a writer for WhatCar.