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The new VED tax rules

The rate of annual tax on new cars (known as Vehicle Excise Duty, or VED) will change from 1 April 2017, affecting new cars bought after this date. However, if you already own your car, then this change won't affect you, but you'd probably still like to save money, here's how Coverbox could help.

Saving money with an older car

If you aren't planning to buy a new car it's good to be aware of other ways of saving money and being more fuel efficient when driving. Black box insurance could work for you. With Coverbox, you can help yourself get the best possible price on your insurance premium by improving your driving ability as much as you can. By checking out the driving data collected by your telematics device in your car which is then displayed on your Dashboard and sent to you in emails, you can correct any bad or potentially risky driving habits.

Better driving could help you become a more fuel-efficient driver, so you can become an environmentally-friendly road user in your own way.

What do the changes mean to you?

VED needs to be paid by all UK drivers, and it's collected by the Driver and Vehicle Licensing Agency.

The changes apply to new cars registered on or after 1 April 2017. Drivers of cars registered before this date can find out applicable rates here.

The new tax rates depend mainly on the extent of the car's CO2 emissions. Basically, cars which pollute more are being taxed more heavily.

The biggest change comes in how cars are taxed in their first year, with a possible charge of £2,000 for high-emission vehicles (above 255g/km CO2). This is a substantial increase from the £1,120 under the current system.

Vehicles emitting 1-50g/km of carbon dioxide will have to pay just £10 in their first year, while those emitting 111-130g/km will have to pay £160.

New tax bands and VED rates for the first year:

  • 0g/km - £0
  • 1-50g/km - £10
  • 51-75g/km - £25
  • 76-90g/km - £100
  • 91-100g/km - £120
  • 101-110g/km - £140
  • 111-130g/km - £160
  • 131-150g/km - £200
  • 151-170g/km - £500
  • 171-190g/km - £800
  • 191-225g/km - £1,200
  • 226-255g/km - £1,700
  • Over 225g/km - £2,000

After the first year, all cars will have to pay a base rate of £140 per year. But if you have a car with an alternative fuelling system, this base rate is £130.

Price matters

The other main factor used to determine tax is the list price of the vehicle. Vehicles costing more than £40,000 will have to pay a £310 charge between years two and six on top of the £140 base rate, bringing the total up to £450.

Keep in mind that it will be the "list price" of the car, so, even if you manage to negotiate a discount for a car with a list price of over £40,000, the higher tax rate will still apply.

After the initial five-year period, the amount will reduce to the £140 base rate.

Consider going green for cheaper vehicle tax

Zero-emission vehicles, such as electric and hydrogen cars, are exempt from tax (but if they cost more than £40,000, they will have to pay the £310 fee for five years).

Let us know what you think by tweeting us at Coverbox using the #roadtaxchanges.