Many lose but some win with new road tax rules

Controversial new system penalises cleaner cars.

Thinking of buying a new car in 2017? You may need to act quickly if you want to avoid being landed with extra road tax bills.

New regulations coming into effect on 1st April will change the rate of Vehicle Excise Duty, VED or to most drivers road tax, across the board. All cars registered from this date will be subject to the new rates, and anyone desiring one of the recent breed of efficient, emissions-friendly cars will end up paying more VED. But it’s time to get the calculators out because there will also be potential savings to be made on certain cars – believe it or not, we are talking less efficient, more polluting vehicles…

Why is it changing?

The current VED system has been in force since March 2001 and is based on the amount of CO2 a car emits. Cars with emissions under 100g/km pay nothing at all, between 100-110 £20 a year, 111-120 £30, and then a big jump to 131-140g/km at £110 per year. In total there are 13 bands with the most expensive costing owners of cars emitting more than 255g/km £515 a year.

When these rates were introduced very few cars qualified for the lowest tax bands. But the Government did not count on the pace of change in the motor industry. Often overlooked and not given the credit it deserves, constant innovation has resulted in a situation where today most new cars pay low VED rates or none at all. And as a result the Treasury receives far less revenue from car owners.

The new system seeks to rectify this – virtually all new cars will now be subject to higher charges in their first year, and then most will pay a flat rate of £140 a year. So the vast majority of new car drivers are facing more expense. The rules by the way only apply to cars registered after 1st April this year – any registered before this date will continue to pay at the current rates.

How does the new road tax system work?

The 13 road tax bands remain under the new system, again differentiated by CO2 emissions, but as our tables show the rates are very different. Whereas before any car with emissions up to 100g/km paid no tax, now only cars with no CO2 emissions at all will be exempt.VED tables

Effectively that means full-electric or hydrogen vehicles and even then a buyer will have to be careful over how much they pay for their car – all cars costing more than £40,000, no matter what their emissions level, will be served with an extra bill of £310 a year for the first five years. Don’t think you’ll escape the charges by buying a Tesla…

All cars emitting any CO2 will pay a rate in the first year based on their emissions, and then a standard fee of £140 a year. And all of the first-year charges are higher than the current rate, substantially so for the most polluting vehicles.

For example, so many of the mainstream cars launched in the last few years produce emissions under 120g/km – the average new car emissions rate in 2015 was around this amount. Let’s take an example of Britain’s best-seller, the Ford Fiesta supermini, not the lowest-power version but a 140hp petrol-engined variant with emissions of 104g/km. Under the current system an owner will pay no road tax in year one and then £20 a year. Under the new system it will be £140 in year one, and then £140 a year.

So many manufacturers in recent years have worked to get their emissions levels under the magic £100g/km marker, and the market is today full of models with CO2 rates of 95-99g/km, paying no road tax. Buy one of these after 1st April and you are looking at £120 in year one, then £140 a year.

Britain’s best-selling car, the Ford Fiesta – several versions with a current £20 annual tax bill will see it jump to £140…

Dirtier but not pricier?

The further one goes up the new tax bands, the more eye-watering the new first-year rates become. At between 171-185g/km the rate is £800, compared to £355 under the previous regime, and for the most polluting plus-255g/km cars it’s a massive £2,000 (ouch!), up from £1,120. But this is not necessarily a good reason not to buy a more polluting car.

Ever fancied a Ford Mustang? And not any Ford Mustang but the proper NASCAR-like version with its 5.0-litre V8 engine? The coupe is currently on sale on the UK market for £36,345. It puts out CO2 emissions of 299g/km, so under the old system it would cost £1,120 to tax in year one and then £550 a year after. Under the new system the first-year charge will be £2,000, but then £140 a year. By the time you buy your fourth year’s tax, you’ll be saving money and if you keep the car for five years you would have saved £750 compared to the old regime.

This perhaps is an extreme case but so long as you stay below that £40,000 price barrier cars that were previously a bad idea tax wise, because of their emissions, are now not necessarily so. And this is where the most criticism of the new system is being leveled, in that it effectively penalizes the buyers of cleaner cars by a much greater amount than it does dirtier ones.

The best seller in the Mitsubishi range is the Outlander PHEV, because it offers the twin plusses of an SUV that almost everyone seems to want these days, and a clean-plug-in hybrid powertrain with emissions of just 42g/km. Currently owners of these cars pay no VED at all. Under the new system their costs will increase by £140 a year, plus a first-year fee of £10 – over three years a total of £290.

The Mitsubishi Shogun puts out 200g/km more CO2 than the brand’s Outlander PHEV – yet over three years Shogun owners will pay just £90 more tax, PHEV owners £390…

Buy the traditional diesel version of the Outlander, however, with emissions of 139g/km, and the costs will be £200 in year one and then £140 a year – so over three years a total of £480. Under the current system, Outlander diesel owners pay £390 over three years – so come April 1st the clean PHEV version’s three-year tax bill goes up by £290, the diesel’s by £90…

Meanwhile you could instead look elsewhere in the Mitsubishi model range, to the least clean car in the line-up. The five-door Shogun SUV can be bought with a 3.2-litre engine and auto transmission, and a 245g/km emissions rate. But again, buy a Shogun after 1st April, and over three years you’ll see a tax bill increase of just £95. Keep it longer and you’ll start saving £360 a year compared to today’s road tax rate – while Outlander PHEV owners, putting almost 100g/km less CO2 into the environment, will carry on paying £140 more than they do now…

You should also read: What happens to the road tax when you sell your car?

Ford Mustang review (The Car Expert)
Emissions-based tax will no longer be as big a drawback to owning a V8-powered Ford Mustang…

Andrew Charman
Andrew is a road test editor for The Car Expert. He is a member of the Guild of Motoring Writers, and has been testing and writing about new cars for more than 20 years. Today he is well known to senior personnel at the major car manufacturers and attends many new model launches each year.


  1. Stuart Masson – you have very little sympathy because you are one of life’s c^&ts who think everyone deserves what they get but will rapidly change their position when they eventually suffer one of life’s injustices.

    • The comment clearly states that the person in question knowingly drove a car on a public road without road tax (and therefore without insurance), with the intention of taxing it later. No, I have no sympathy for them getting caught. There’s no injustice here, but there would have been if he had hit another car or a pedestrian and not been insured.

      Thanks for stopping by, don’t bother coming back.

    • Wow Richard, ironic that you call someone else a C^&t when your name’s D1ck. Are you still upset because your mum was the town bicycle and you don’t know who your dad is?

  2. On the subject of car tax generally, I have a question. A friend of mine recently bought a vehicle which was not roadworthy – hence it was collected on a recovery truck and taken to the garage where he works. He worked on the vehicle for two days and, having left the V5C at his hone, he then set off to drive the short distance home intending to tax the vehicle as soon as he got home. So it was really bad luck when he got stopped by police, who were parked up in a layby. The police threatened to have the vehicle impounded, but my friend showed them the receipt (dated tow days earlier) and the new parts which he had fitted in order to put the vehicle back on the road – and he explained that he had accidentally left the V5C at home. The police then gave my friend the phone number of the recovery firm and told him to call them and pay £260 over the phone – £160 of hwich would be refunded ot him the following day if he attended at the recovery firm’s premises with evidence that he had actually taxed the vehicle. My friend wanted to know what happens to the other £100 and when the police told him that this would be retained by the recovery company, my friend objected to and said that he would rather pay a £200 fine to DVLA or the Court than give £100 to a private company for doing absolutely nothing. But the police said that was not his choice and he could either do what they said, or they would phone the recovery company themselves and have his vehicle towed away.
    I have heard lot of rumour about dubious arrangements between police and recovery companies and this suggests that there is some foundation to this. Surely no Company should be allowed to charge £100 for nothing and profiteer in this blatant manner and it seems outrageous that the police should be orchestrating this apparent rip off. Bur where should we go to complain about this?

    • I highly doubt that the police are “orchestrating a rip-off”. There is presumably a perfectly legal contract in place between the relevant police force or government department and the recovery firm.

      Ultimately there is no excuse for knowingly driving a vehicle without road tax or insurance (if the car is not taxed, any insurance policy would be void), so I have very little sympathy for your friend.

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