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Road Tax changes - here's what you need to know

Starting from April 1st 2017, Vehicle Excise Duty is going to change. Here is a summary of what you need to know about the new rules.

Road tax rules - Now

As things stand, road tax is divided into ‘bands’ based on vehicle CO2 emissions levels. Drivers were rewarded for choosing lower-emission cars with a lower rate of tax. With manufacturers showcasing better engineering in every new car, many of the latest models have attractively low VED rates. New cars have to reach band D, 121-130g/km, before significant road tax charges are applied. The Government are now changing those low-emissions benefits for cars registered from 1st April 2017, to bring more tax money back to the Treasury as the current situation is deemed as unsustainable.

The most important changes

The first year of registration will now likely be the most expensive in terms of road tax. Currently, vehicles with CO2 rated up to 130g/km pay nothing in the first year but will pay anything up to £160 in year one from April 2017.

From the second year of ownership onwards, the CO2 scale becomes irrelevant and an annual flat rate of £140 will apply to most vehicles. Fewer vehicles will be completely exempt. Currently many low-emissions vehicles cost £0 in VED for at least the first year. The changes mean this will now only apply to models with zero emissions – those powered fully by electricity or hydrogen.

If you lease or buy a car that costs £40,000 or more, an additional supplement will apply. The annual supplement is £310, resulting in a VED charge of £450 annually for the following five years.

Remember, these changes will only apply to new cars registered from 1st April 2017. There will be no change to the VED charges for vehicles registered before this date. Commercial Vehicles are also unaffected by the changes.

Will VED changes affect me?
Any increases in VED will be reflected in the contract hire rentals.

It’s been suggested that as many as seven in ten motorists will end up paying more road tax as a result of the changes with buyers of smaller, more economical cars facing the biggest tax increase. For example, the Ford Fiesta with a 1.0-litre EcoBoost 100PS or 125 PS engine and CO2 emissions of 99g/km, is one of the most popular new cars in the UK. There is currently no road tax to pay in the first year or annually. Under the new laws, this model will cost drivers an extra £540 over four years.

However, if you choose a car with higher emissions, you might find that the VED costs are lower and this will also be reflected in the contract hire rentals.

Contact us at Gates Leasing to find out more about the VED changes and contract hire rates for new cars.

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Posted on 24th January 2017 at 5:30 PM

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