In 2015 the Government announced that the way in which they charge Vehicle Excise Duty (VED) – also known as Road Tax, Car Tax, Road Fund License (RFL), the Tax Disc, Car duty – would change from 1st April 2017. This is known as ‘VED Reform’ and the DVLA will implement the change for all new car registrations from 1st April 2017.
–– It will NOT apply retrospectively to vehicles registered before that date
–– It will NOT apply to other vehicle types, e.g. Commercial Vehicles, Motorbikes, HGVs.
NEW VED RULES
–– From April 2017, the First Year Licence rate of VED will continue to be related to the CO2 emissions of the vehicle – but the bands will change and rates due will increase.
–– In the second and subsequent years the ‘Standard’ rate of VED will no longer be related to CO2 but will be related to the list price of the vehicle
–– For vehicles with ‘List Price’ of £40,000.00 or less, the rate will be £140
–– For vehicles with ‘List Price’ over £40,000.00, an ‘additional rate’ of £310 (a total of £450) will be due for 5 years from end of the First Year Licence
–– After the additional rate expires the £450 will revert to £140, or whatever the prevailing rate is at the time.
WHAT IMPACT WILL THIS HAVE?
–– As a minimum, all cars (with the exception of Zero Emission Vehicles – ZEVs) will see anincrease in the amount of VED that is due on them from the 1st April 2017
–– Additionally, the majority of vehicles will see an increase in the cost of renewing their VED on an annual basis (Standard Rate)
–– The most significant change is that the Standard Rate of VED is no longer linked to the CO2 emissions of the vehicle but is instead linked to the DVLA List Price of the vehicle
–– This means that the DVLA List Price of the vehicle will determine how much VED is due on the vehicle in future years
–– As the DVLA List Price is primarily determined by the price of the vehicle and the price of options fitted to it, the choice of those options can be critical to how much VED is due in future years
–– It is therefore important to be aware that the cost of options can increase the DVLA List Price of the vehicle to over £40,000 and increase the Standard (2nd year) VED rate from £140 to £450.
CAN YOU GIVE ME AN EXAMPLE?
Lexus RX 200t S
Now: £800 / 2017: £1080 / Change: +£280
This specification creaps under the £40,000 limit by £5, and from 2017 comes with three year's costs at £800 (FYR) and 2 x £140 (standard). Interestingly, after four years, buyers will be £65 better off post-tax changes.