New car tax rules for 2017

New car tax rules have added several hundred pounds to the cost of most new cars

BuyaCar team
Apr 3, 2017

Since April 1 this year, all brand new cars have been taxed under a new system, which is substantially different to the previous one and will cost most owners considerably more each year.

Some drivers will find themselves paying £450 a year for cars which used to qualify for free tax and virtually everybody must pay an annual fee of £140.

Among the hardest hit are the hundreds of thousands of people who buy low emissions cars. These vehicles used to be exempt, but are now subject to £400 in tax over three years.

It’s the biggest shake-up of car tax - also known as Vehicle Excise Duty - since 2001, and is predicted to earn the government an extra £1.4bn a year by 2020. 

It's important to note that it only affects cars that are registered from April 1. You can avoid the new charges by buying a used or nearly new car. For a short amount of time, there are also also stocks of pre-registered cars, which beat the April cut-off.

There's also no change to the company car tax system, so if you're a business user, buying a low-emissions car can still save you a considerable amount of money.

Jump down to see the new tax rate table

2017 car tax winners and losers: the cars that will cost you a lot more - or a bit less

New car tax rules for 2017

Year 1

The new system has a first-year rate for brand new cars, based on carbon dioxide emissions. Unlike the previous system, which made hundreds of thousands of cars exempt from tax, only fully electric vehicles (or future hydrogen models) are tax free because they emit no CO2 while driving.

The rate then swiftly climbs from £10 for the handful of cars that put out 1-50g/km CO2, up to £160 for vehicles emitting 120.1g/km CO2 - the average for a new car. It tops out at £2,000 for car emitting over 256g/km.

Cars classed as alternative fuel vehicles - including hybrids - receive a £10 discount on this first year rate.

If you own a typical family hatchback such as a VW Golf 1.4 TSI Match (below), it will attract a £160 first-year charge. Under the old system, it was just £30.


Year 2

From the second year, zero-emissions cars will be exempt again. Every other vehicle will attract a flat charge of £140. Again, this is discounted by £10 for alternative fuel cars, including hybrids.

That's not the end of the charges, though. If your vehicle had a list price of more than £40,000 when new, then you'll have to pay a wealth tax of £310 a year for five years (until the car is six-years-old). This also applies to electric cars.

Some expensive plug-in hybrid cars, which were previously exempt from tax, will be subject to almost £1,000 in car tax over three years, but will still be extremely competitive if you're looking for low company car tax.

Be careful when you're choosing optional extras on new cars: if they increase the price to more than £40,000, then you'll be liable for the extra cost.

As it's based on the list price, the additional £310 fee applies if you get a new car discount that brings the cost of your car to less than £40,000.

The owners of the Golf Match, will find themselves paying £140 every year, instead of their £30 annual charge.


Previous car tax system

The old car tax regime, which applies to every car registered up to the end of March, also has a first-year rate. 

Cars emitting less than 100g of CO2 for every kilometre that they drive attract no tax and charges are minimal for those that emit up to 120g/km CO2. 

Vehicles that produce high levels of CO2 attracted a large tax bill in the first year that they were registered - up to £1,120

Vehicles continue to be taxed on their CO2 emissions in subsequent years. Low-emissions cars remain tax free and the most expensive rates drop to a maximum of £515.


New car tax rules 2017: should I buy a new or used car?

Buy a used, nearly new or pre-registered car and it won't be affected by the new tax schedule. The government has said that your car will continue to be taxed under the old car tax system for the rest of its life.

So not only will these vehicles usually cost less than a brand new car, but you will probably save yourself severl hundreds of pounds in tax over the years that you have it.

Owning a brand new car is likely to become more expensive, particularly if it cost more than £40,00 when new. If that's the case, you'll pay at £450 in tax each year (£440 for a hybrid or £310 for an electric car). If your budget is tight, then it could make the difference between a new car being affordable or not.

However, in some unusual cases, you'll pay slightly less tax for a new car. This only applies to a handful of vehicles, such as the Volkswagen Tiguan R Line 2.0 TDI 240PS (above), with high CO2 emissions, which cost less than £40,000 when new.

To compare the tax differences for several types of car, see the winners and losers of the 2017 road tax rules.


New car tax rules from April 2017: table

Compare these figures with the pre-April car tax rates

Reduce the first-year rate and standard rate by £10 a year for hybrid and other alternative fuel cars

CO2 emissions

First year rate

Following years standard rate

Standard rate for cars over £40,000





























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