Vehicle excise duty (VED) is also known as road tax, and it used to be evidenced by a paper disc fixed to the vehicle’s windscreen. The paper disc was abolished in October 2014, and now the structure of VED for cars is being overhauled.
Where our client is planning to buy a new car, a motor home, or an off-road vehicle, they may be better off making the purchase before April 2017. The magazine What Car? has analysed the effect of the changes on the cost of purchasing popular models; in general the buyer will pay more from April onwards.
The VED for the first year of registration will be based on the vehicle’s CO2 emissions, set into 13 bands. The lowest band is for zero emissions only, which attracts a nil rate of tax. For other bands the VED ranges from £10 to £2,000. In subsequent years of registration, the VED is £140 for all cars, except for zero emission cars where the VED is still nil.
However, if the list price of the car was £40,000 or more, including all the extras, the VED will be £450 (£310 for zero emissions) for years two to six. Choosing a car with list price under £40,000 will make a significant difference to the ongoing costs.
Cars which were first registered between 1 March 2001 and 31 March 2017 are subject to VED depending on their CO2 emissions in the same 13 bands. The VED ranges from nil to £515 per year, with higher rates in the first year of registration. The VED for cars registered before March 2001 is related to vehicle’s engine size.
Written by the Tax Advice Network