Buying a New Car in the UK? The New Road Tax Rules

Updated on January 22, 2019
Ryan-Palmsy profile image

This author is a car enthusiast with his eyes on the bigger picture.


New Road Tax Rules for New Cars in the UK

Hey you beautiful Brit, are you planning on buying a new car? Well, we need to talk. George Osborne is changing all the road tax rules for new cars.

On Saturday, April 1, 2017, the Vehicle Excise Duty (often known as Road Tax) rates changed. Here's a recap:

  • The current system is based on the emissions of a vehicle. The higher the emissions, the higher the tax.
  • The emissions are worked out in grams of carbon dioxide per kilometre (g/CO2/KM).
  • So how how much must you pay for your car?
  • Easy! You'd look at the emissions, and then see which band it falls in. At the moment there are 13 bands ranging from Band A to M, as seen on the below table.

Band & CO2 emissions (g/CO2/KM)
First Year Rate
Subsequent rate thereafter
A 0 - 100
B 101 - 110
C 111 - 120
D 121 - 130
E 131 - 140
F 141 - 150
G 151 - 165
H 166 - 175
I 176 - 185
J 186 - 200
K 201 - 225
L 226 - 255
M 255 +

How Much Emissions Tax Will You Need to Pay for Your Car?

Of course this information is meaningless in this form, so let's apply it to an example, shall we?

Let's start with something a little plain and boring like the 2016 Ford Mustang GT 5.0 V8. Say you wander down to your local Ford dealership today and buy a brand new 'Stang. You spring for the 5 Litre V8 version, which releases a total of 299g/CO2/KM into the atmosphere.

(To put this number in context, an iPhone 6 weighs in at 129 grams meaning the Mustang releases the same weight in carbon dioxide as 2.3 iPhone 6's weigh for every 1000 metres driven.)

Because this fine automobile sits firmly in Band M, the rate of road tax for the first year is £1,120. For each subsequent year the amount of road tax payable decreases to £515. If we take the average lifespan of a car to be 13 years, you can quite easily calculate the amount of road tax due totals £7,815.

Let's contrast for a moment with a slightly more environmentally friendly car. The BMW i3 is an alternative little family car and there are two variants; an all-electric car with a range of approximately 100 miles and a 'range extender' model. We will focus on the i3 Range Extender (RE) here. Like an electric car, it is powered by an electric motor, has batteries which store electricity to power the motor and can be plugged in and charged – but isn't a fully electric car. It has a 1 litre petrol motor which is only used to generate electricity for the electric motor when the batteries power drops below 5%. On average it releases a tiny 13 grams of CO2 per kilometre. The appeal of the BMW i3 RE is that it is an environmentally friendly car without the potential 'range anxiety' worries that consumers can get from regular electric cars.

But anyway, let's get down to brass tax! Sorry, I mean road tax. By releasing 13 grams of CO2 per Kilometre it is placed into Band A, which means when you get the keys to your brand new BMW i3 RE you will pay precisely nothing to the tax-man (No, he is not the lamest superhero ever – that's gotta be Arm-Fall-Off Boy).

Don't you feel tougher just looking at it?!
Don't you feel tougher just looking at it?! | Source

So this is the current Road Tax system, and it makes sense – cars that are better for the environment get tax benefits, and those that aren't bring money in to the government to pay for services like hospitals, police forces and environmental policies.

Anyway, this doesn't really matter because it's all about to change...

This may be a little different, but you can't argue with the figures.
This may be a little different, but you can't argue with the figures. | Source

The New System

Like the old system, the new one will revolve around cars being placed into 'bands' – however these bands are not listed A-M like the previous system. So why is this?

I hear you cry: “A-M is pretty straight forward, I know without even looking that “M” means my car is taxed at £515 a year and “I” means my car is taxed at £230 a year without even looking!”

Well the reason for this change is that the band will only really affect the price of tax for the first year after a vehicles production. New cars will be charged a 'first year rate' dependent on their emissions, which will then change to the set and immovable standard rate for each subsequent year, for the remainder of the cars life.

And now for a table!

Emissions (g/CO2/KM)
First Year Rate
Standard Rate
01 - 50
51 - 75
76 - 90
91 - 100
101 - 110
111 - 130
131 - 150
151 - 170
171 - 190
191 - 225
226 - 255

Unlike the current system, the only cars that will be exempt from paying road tax are fully electric cars, such as the Nissan Leaf and the Renault Zoe. All low emission vehicles will now be subject to road tax along with any vehicle that produces emissions whatsoever, no matter how low or high these figures are.

Time for an example! To keep it simple we are going to stick to the vehicles we used earlier.

So it's the 2nd April 2017 you've bought your 2017 Ford Mustang GT 5.0 V8, and now it's tax time! Since it releases 299 g/CO2/KM this magnificent beast falls into the final bracket of road tax, 255+. So that's a £2,000 bill before the car is even road-legal, £800 more than previously. After a year the cost in road tax will decrease to £140. Within the average car's 13-year lifetime you will pay the grand total of £3,680 in road tax. The eagle-eyed among you will have noticed that that total tax payable has gone down when comparing the new system and the old system. It has reduced the tax liability on the Mustang by £4,135 to be exact.

Seriously, this car might not be pretty but it sure is cool.
Seriously, this car might not be pretty but it sure is cool.

Okay, so let's look at the BMW i3 RE instead. This car releases a total of 13 g/CO2/KM into the atmosphere. Under the old system the car would never pay a penny in road tax, but the new system states cars that produce 13 grams of CO2 per KM fall into the second category, 1-50. So that's £10 for the first year, and then £140 for each subsequent year thereafter. Over 13 years that means a total of £1,690 paid in road tax.

So in conclusion, the new system will push tax up for cars low emissions, and bring it down for cars with much higher systems.

Pictured: Tesla Model S looking awesome and saving the environment
Pictured: Tesla Model S looking awesome and saving the environment | Source

What Does the Tax Change Mean for Cars With Very Low Emissions?

By ensuring low-emission cars pay the same amount of road tax when the standard rate is applied as the most polluting new cars on the road, this new system creates a significant danger that the average consumer will purchase a more environmentally unfriendly vehicle that has a lower list price. The eventual impact of this would be that greener technologies could become more difficult to fund and the speed at which low-emission vehicles are evolving could slow significantly. Electric and hybrid technologies have improved massively over the past few years, and at the current rate of advancement in the industry we could see fully electric cars which can travel just as far as a regularly fueled car on one charge priced at the same rate as a run of the mill diesel family hatchback – it's not beyond the realms of possibility, look at the Tesla Model S which boasts a 300+ mile range on one charge...

Speaking of the Tesla, I haven't mentioned the final part of the road tax reform. The final part states that any vehicle valued at over £40,000 will incur an automatic £310 tax each year for 5 years. So why do I mention Tesla? Well starting at over £70,000 the Tesla may be fully electric and produce NO emissions, but the total road tax payable will be £1,550. Some will argue that Tesla drivers can afford this however.

The government has updated the road tax legislation because they feel the current bands are outdated and reflected a time when 'low emission vehicle' was an entirely different term. Essentially, what was once environmentally friendly might be considered normal now, so why not change the goalposts? The policy's stated objective is to make people consider only the cleanest cars in future. The policy, according to Mr Osborne, will also take money paid in car tax and put this back directly in to the roads themselves - something not done since 1936.

With these changes afoot, we need to ensure that this world-saving technology remains the future.

Finally a Word

I'm very much a petrol head, anything from Mustangs to Volkswagen Beetles are my bag – if it's got an engine I'm interested! Because I love anything automotive, I'm passionate about electric cars. Oil and therefore petrol is a finite resource, and we're rapidly running out of the stuff – so we can all continue driving these meticulously crafted machines that offer a serious thrill we need to invest in electric and ultra-low emission cars like the Tesla Model S and BMW i8, Porsche 918 and yes, even the Nissan Leaf.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


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