New Road Tax Rules Explained!

New Road Tax Rules Explained!

The way Road Tax is charged has undergone a major reform during 2017. The aim is to charge those who can most afford it the most road tax and reward those who drive a zero emissions vehicle by making these the only vehicles exempt from the road tax payment. Further changes to come in 2018 will punish diesel cars that do not meet Euro 6 emissions standards in Real Driving Emissions tests by charging these a higher amount of road tax.

The current road tax system and why it needs to change

The current road tax system has varying rates of tax related to how much CO² g/km your vehicle produces, the current rules relate to vehicles that were registered on or after March 2001. When the current system was introduced the average CO² emissions from a vehicle were 178g CO²g/km. Since then, car manufacturers have worked towards producing more environmentally friendly vehicles to meet EU targets. As air pollution exposure contnues to claim lives the EU make increasingly hard limits for Country's to meet to reduce the amount of pollution in their skies. This has resulted in the average emissions of a vehicle falling to 121.4g CO²g/km by 2015.

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This has meant many cars now seen as ‘normal’ in terms of emissions are still included in the low emissions category, so are paying £0 car tax. Leading to 3 main effects;

  1. A weakened environmental message - as lower road tax for low emission cars was supposed to encourage car buyers to purchase more environmentally friendly vehicles.
  2. Those who may not be able to afford a newer lower emission car were paying the most car tax - this is seen as unfair as these are the people who can afford it the least.
  3. Of course, it also meant a loss in revenue for the Government too - so something had to be done!

How much Road Tax will I pay on a car registered on or after April 1st 2017?

To correct these problems the new road tax rates were announced by George Osbourne when he was the Chancellor of the Exchequer. They came into effect as of 1 April 2017 for all newly registered vehicles. The changes will not be applied retrospectively, so unless you purchase a new car on or after April 1st 2017, you will continue to pay your current rate of road tax.

New Road Tax Rates for Cars Registered on or after April 1st 2017

CO2 Emissions  (g/km) First Year Rate (£) Standard Rate from Year 2 for Petrol or Diesel (£) Standard Rate from Year 2 for Alternative Fuel (£) 
1-50  10  140  130 
51-75  25  140  130 
76-90  100  140  130 
91-100  120  140  130 
101-110  140  140  130 
111-130  160  140  130 
131-150  200  140  130 
151-170  500  140  130 
171-190  800  140  130 
191-225  1200  140  130 
226-255  1700  140  130 
Over 255  2000  140  130 

Cars with a value over £40,000 will pay an additional £310 supplement for the first 5 years.

Road Tax changes mean after April 2017 only cars that produce 0g CO²g/km will be exempt from payment. The first year rate that will still charge drivers based on emissions. Then all vehicles that emit CO², regardless of amount, will pay a standard rate of £140 or £130 depending on fuel type. To charge those who are considered most able to afford it, a supplement of £310 per year will apply for 5 years on vehicles with a value over £40,000 from year 2. After 5 years only the standard rate will be charged.

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Further tax changes for diesel cars from April 2018

During the budget November 2017, further changes to the road tax system were announced. These changes specifically affect diesel cars.

Changes to the way a vehicles emissions are tested are now being used in the UK. This includes a Real Driving Emissions test (RDE), that measures levels of emissions out on the road rather than under laboratory conditions. Any diesel car which does not meet Euro 6 emissions standards in the RDE test will pay more tax from April 2018. If you have a diesel car which has failed to meet Euro 6 standards in the RDE you will pay the tax cost of the next band up for your first year.

For example, if your diesel car produces 180g/km of Co2 you can see from the table above you would expect to pay a first year rate of £800. However, if this car has failed to meet Euro 6 emissions standards in RDE test you will actually pay a first year rate of £1,200, the cost for the next band up.

This extra change does not apply to vans and will not changes the standard rate from year 2. It is solely for cars and affects only the first year rate.

How does the cost of road tax compare between the old and new system?

The answer on how charges compare between the old and new road tax systems depend on the vehicle you are buying and how long to intend to keep it for. To give a few examples we have taken 3 popular cars and compared the road tax charges before the changes and after the changes for 3,5 and 10 years of ownership ...

Example 1 - The UK's number 1 selling car, the Ford Fiesta 99 g/km CO²

Ford Fiesta Road Tax Comparison

 3 years of ownership  5 years of ownership10 years of ownership 
 Registered before April 1st 2017  £0 £0  £0 
 Registered on or after April 1st 2017  £400 £680  £1380 

With emissions of around 99g/km the Ford Fiesta would have been considered a 'low emissions' vehicle under the old road tax rules, this is no longer the case under the new road tax rules.
Buyers of cars which produce under 100g/km of CO2 are the ones who are going to face the biggest changes under the new road tax rules.

Example 2 - The best-selling SUV in the UK for 2016, the Nissan Qashqai 129 g/km CO²

Nissan Qashqai Road Tax Comparison

 3 years of ownership 5 years of ownership 10 years of ownership 
Registered before 1st April 2017   £330 £550  £1100 
Registered on or after April 1st 2017   £440 £720  £1420 

A driver of a car with CO2 levels similar to the Nissan Qashqai can expect to pay more road tax under the new system

Example 3 - The sports car, the Jaguar F-Type 255 g/km CO²

Jaguar F-Type Road Tax Comparison

  3 years of ownership5 years of ownership 10 years of ownership 
Registered before April 1st 2017  £1500 £2500 £5000 
Registered on or after April 1st 2017  £2600  £3500  £4510 

The Jaguar F-Type has a high level of emissions and has a retail price over £40,000 so will be subject to additional charges under the new road tax rules. However, after 10 years the owner would start to make a saving with the new road tax rules, compared to the previous system.

None of our leasing customers will need to spend a moment considering road tax, as it is already included in your monthly payment! If you would like to find out more about the benefits of leasing check out our leasing guides.

What do you think of the changes? Will CO² emissions influence which car you buy next?

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