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From 1 April 2017, some of the most extensive changes to the UK’s road taxing structure will take place. Any new car registered after this date will be subject to the new rules. Generally, most cars will cost slightly more to tax than they did previously, leaving only cheaper electric cars with tax-free status.

Why is road tax changing? - When the outgoing system was conceived, taxation was linked to a car’s O2 output – this meant that cheaper, more efficient cars paid a relatively small amount while pricier, more polluting cars paid much more. The problem with this system emerged when it became clear to the treasury that, thanks to greatly improved engine and vehicle design, many normal cars were emitting such little CO2 that they actually fell into the tax-free bracket. This lowest band was originally intended for electric, hybrid and niche low-emission cars but, as technology has improved, more conventional cars wound up here and paid no tax. To bolster its cash flow, the government has introduced this new taxing regime to push more conventional cars back into taxation and reserve tax-free status for a handful of zero-emission cars.

What are the 2017 road tax changes? - As before, you’ll have to pay a first year tax rate that’s linked to the car’s CO2 emissions, followed by a standard rate for each year after that. The standard rate for every car is £140 per year but models costing more than £40,000 (after options) will incur an additional £310 cost, meaning most premium models will now cost £450 in total per year to tax. Any zero-emissions vehicle – i.e. electric cars – won’t incur either the first year or standard rate of tax but, unlike previous years, this no longer applies to plug-in hybrid models that still use a conventional combustion engine. If, however, your zero-emission vehicle costs more than £40,000 – such as a Tesla Model S – you still incur the £310 additional cost for the first five years of ownership before returning to tax-free status. As before, tax is no longer transferrable between owners. This means if you sell your car, the new owner will have to tax it themselves – any remaining tax on the vehicle can be claimed back from the government. Also unchanged is the £10 reduction in tax rates for alternative fuel vehicles such as those converted to run on LPG.

2017 road tax bands

CO2 Emissions (g/km) First Year Rate Standard Rate (Year 2 onwards)

Standard Rate (Year 2 onwards)

for cars costing >£40,000 payable for 5 years

0 £0 £0 £310
1-50 £10 £140 £450
51-75 £25 £140 £450
76-90 £100 £140 £450
91-100 £120 £140 £450
101-110 £140 £140 £450
110-130 £160 £140 £450
131-150 £200 £140 £450
151-170 £500 £140 £450
171-190 £800 £140 £450
191-225 £1,200 £140 £450
226-255 £1,700 £140 £450
>255 £2,000 £140 £450

Real world examples - We’ve done the maths for a range of cars to demonstrate the changes between the outgoing tax system to the 2017 system. Below, we pluck out some noteworthy examples to show you what effect the changes will have.

Nissan Leaf – all-electric - The electric Nissan Leaf is simple – it has no CO2 emissions because it’s fully electric and costs less than £40,000. That means it’s free to tax under the current system and also under the proposed 2017 tax band system. Extra cost over three years: £0

Tesla Model S – all electric - The Tesla Model S is a luxurious electric car that’s currently free to tax. Come 2017, it’ll be free to tax in the first year because it has no CO2 emissions, but then sting you with £310 per year afterwards because it costs more than £40,000. The 2017 system means not all electric cars will be free to tax like they currently are. Extra cost over three years: £620

 

Volkswagen Golf – 2.0-litre diesel, 148hp, 109g/km CO2 - The 2.0 TDI Golf Match would currently cost nothing for the first year, then £20 per year to tax under the current system.
Under the 2017 system it’d cost £140 per year to tax every single year. Extra cost over three years: £380

 

 

Audi A6 Allroad – 3.0-litre diesel, 269hp, 149g/km CO2 - The A6 Allroad is a relatively frugal – but large-engined – diesel estate car that costs more than £40,000. It’d currently cost you £145 per year to tax – or £435 over three years. Under the 2017 system it would cost £200 to tax for the first year, and £450 for each year thereafter – a total of £1,100. That’s £665 more over three years. Extra cost over three years: £665

 

 

So it’s bad news then? - While the changes will mean increased costs for most car owners, there are a handful of small silver linings here. Firstly, if you fancy a powerful car that pollutes quite a lot but is relatively cheap such as a Ford Mustang or Nissan 370Z, your tax bills will be lower after 1 April because both models costs less than £40,000.
Even if you’re not one of the lucky few to see a smaller tax bill, the government has promised to make road tax actually pay for the roads we use. Before, road tax simply went to the treasury and road improvements were (or weren’t) paid for from there but now money paid in road tax will go directly towards road improvement.

 

 

 

 

 

 

 

 

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