Muras Matters: New Vehicle Tax Regime

New Vehicle Tax Regime


Vehicle tax on newly registered vehicles is changing from 1 April 2017.

The current structure is based on CO2 bands and was introduced in 2001 when average UK new car emissions were 178 g/km. The new rules are being introduced to reflect changes in emissions technology in newer cars and were first announced by former chancellor George Osborne two years ago.

Tax rates for vehicles registered before April 1 2017 will not be affected by this change.


Under the new rules, for vehicles registered with the DVLA from 1 April 2017, vehicle tax for the first year will be based on CO2 emissions. Details of the amount payable are available on HM Revenue & Customs website – CO2 emissions, starting from £nil for zero emission vehicles rising to £2,000 for emissions over 255g/km. There is no 6 month payment allowed for the first year.

After the first year, the amount of tax payable will depend on the type of vehicle. The rates will be:

  • £140 a year for petrol or diesel vehicles
  • £130 a year for alternative fuel vehicles (hybrids, bioethanol and LPG)
  • £0 a year for vehicles with zero CO2 emissions

However, for new vehicles with a list price of more than £40,000 there is an additional cost of £310 a year for years 2 – 6. For example, a petrol vehicle will have a vehicle tax of £450, being the £140 + the additional rate of £310.

After year 6 the vehicle will then be taxed at one of the standard rates (£140, £130, or £0, depending on vehicle type).

Whilst vehicle tax may not be a defining consideration in the purchase of a new vehicle, it may be a factor to take into account if you are looking to purchase a new vehicle in the near future.

If you have any questions on the above or would like more information in connection with any of the points above please contact our Tax Director, Jenny Marks.

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