New Vehicle Tax Rates April 2017

We all know that there are a few things we need to consider before buying a new car.

These are some common questions which are asked by clients (hopefully before they go ahead and make that major purchase):

“Should I purchase a car through my business or should I use my own car for business use?”

“Should I lease or purchase a car?”

…and perhaps the most common question of all:

“How much tax will I have to pay?”

You may be interested in purchasing an electric car because you are concerned about the environment.  The government have certainly put in place tax incentives to encourage us to think ‘green’ and, with BMW recently deciding to build their future electric cars in the UK, it would seem that the motor industry is following suit.

Despite the many obvious things we all have to consider when purchasing a new car perhaps there is one thing that you may not be aware of and that is the new vehicle tax rates that were introduced from 1 April 2017.

The way vehicle tax is calculated has changed for cars and some motor homes that were first registered with DVLA from 1 April 2017.  The change doesn’t affect any vehicle registered before 1 April 2017.

The rates explained

Vehicle tax for the first year is based on CO2 emissions.  From 1 April 2017 this rate has increased and is now between £0 for electric cars and £2,000 for the highest polluting cars.  Vehicle tax rates can be checked by visiting https://www.gov.uk/vehicle-tax-rate-tables.

After the first year, the amount of tax that needs to be paid depends on the type of vehicle. The rates are:

  • £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 (electric vehicles)

New vehicles with a list price of more than £40,000

If a vehicle has a list price (the published price before any discounts) of more than £40,000, the rate of tax is based on CO2 emissions for the first year.

After the first year, the rate depends on the type of vehicle (petrol, diesel, alternative fuel or zero emissions) as above plus an additional £310 a year for each of the next 5 years.

After those 5 years, the vehicle will then be taxed at one of the standard rates (£140, £130, or £0) depending on vehicle type.

So for vehicles with a list price of more than £40,000, from the second time they are taxed and for the next 5 years, the amount of tax to pay will be as follows:

  • £450 a year for petrol or diesel vehicles
  • £440 a year for alternative fuel vehicles (hybrids, bioethanol and LPG)
  • £310 a year for vehicles with zero CO2 emissions (electric vehicles)

If you are considering the purchase of a new car and would like more information about the new vehicle tax rates then please click on the following Youtube video link: https://www.youtube.com/watch?v=hbV7Yfud1dE

There are certain accounting and tax issues associated with business vehicles so please get in touch if you have any questions about a vehicle you wish to use in your business.  Remember it is always a good idea to ask for advice before making a major purchase as it is important to know all the facts before making a decision.

If you would like to discuss any of this further then please contact us 0116 2423400

Beth Judd, Accounts & Tax 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s