In 2015 the Government announced that the way in which they charge VED – also known as Road Tax, Car Tax, Road Fund Licence (RFL), the Tax Disc, Car Duty – will change from 1st April 2017. Importantly, the new VED rules will not apply retrospectively, only to new car registrations from 1st April 2017 onwards. So if you’re thinking of buying a new Land Rover or upgrading your existing vehicle, register before 1st April and you’ll beat the additional VED charges.
How did VED work before?
Before April 1st 2017, VED was based on the CO2 emissions of the vehicle – so the greater the CO2 emissions, the more VED was charged. There was one rate for the first year (first licence rate) and another for the second and subsequent years (standard rate). The standard rate, like the first licence rate, also increased with CO2 emissions.
How will VED work from April 1st 2017 onwards?
From 1st 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 the rates will increase. In subsequent years the standard rate of VED will no longer be related to CO2 but will depend on the DVLA list price of the vehicle.
- For vehicles with a DVLA list price of £40,000 or less, the standard rate will be £140.
- For vehicles with a DVLA list price of over £40,000, an additional rate of £310 will be due every year for 5 years from the end of the first year licence. This totals £450 annually, when added on top of the standard rate. After the additional rate expires, the £450 will revert down to whatever the prevailing standard rate is at the time.
- Cars with zero emissions will not pay any VED in their first or subsequent years, unless the car’s list price is over £40,000. In this case, you’ll pay the additional rate of £310 for five years after the end of the first licence.
CO2 First Year Rate Standard Rate* 0 £0 £0 1-50 £10 £140 51-75 £25 £140 76-90 £100 £140 91-100 £120 £140 101-110 £140 £140 111-130 £160 £140 131-150 £200 £140 151-170 £500 £140 171-190 £800 £140 191-225 £1200 £140 226-255 £1700 £140 Over 255 £2000 £140
*Cars with a list price of over £40,000 when new will pay an additional rate of £310 per year on top of the standard rate, for five years.
What does DVLA ‘list price’ mean?
List price for this new VED calculation does not mean the price you paid for the vehicle, but is based on the manufacturer’s recommended retail price for the vehicle and the options fitted to it at the time of registration. We’ve chosen to call this the DVLA list price to distinguish it from other pricing figures.
The DVLA list price includes:
- Price of the vehicle
- Price of manufacturer fitted options
- The charge for getting the vehicle to the retailer premises (delivery charge)
- The cost of number plates
- Pre-delivery inspection (PDI) charges
- VAT on all the above at the prevailing rate
- Electric cars: if the battery is leased then the cost of the battery constitutes part of the list price.
How will this all affect me?
As a minimum, all newly registered cars (except zero emissions vehicles) will see an increase in the amount of VED that is due for the first licence from 1st April 2017. The majority of newly registered vehicles will also see an increase in the cost of renewing their VED on an annual basis.
The most significant change is that the standard rate for renewals of VED is now tied to the DVLA list price rather than CO2 emissions. It’s the DVLA list price that will determine how much VED is due on a vehicle after the first year licence rate has ended.
As the DVLA list price is determined by the price of the vehicle plus fitted options combined, your choice of options is important in determining how much VED is due in future years. Discuss this in detail with your Retailer where your choices fall near to this £40,000 threshold.
FIND OUT MORE FROM THE DVLA HERE
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