New changes to Vehicle Excise Duty (VED) will come into effect for new cars registered from 1 April, 2017 as part of the VED Reform.
The below table shows the new charge system (on the right) against the outgoing system (on the left):
| Pre-April 2017 | Post- April 2017 | |||
|---|---|---|---|---|
| Emissions First Year Rate (g/CO2/km) | First Year Rate | Subsequent Rate | First Year Rate | Subsequent Rate* |
| 0 | £0 | £0 | £0 | £0 |
| 1-50 | £0 | £0 | £10 | £140 |
| 51-75 | £0 | £0 | £25 | £140 |
| 76-90 | £0 | £0 | £100 | £140 |
| 91-100 | £0 | £0 | £120 | £140 |
| 101-110 | £0 | £20 | £140 | £140 |
| 111-120 | £0 | £30 | £160 | £140 |
| 121-130 | £0 | £110 | £160 | £140 |
| 131-140 | £130 | £130 | £200 | £140 |
| 141-150 | £145 | £145 | £200 | £140 |
| 151-165 | £185 | £185 | £500 | £140 |
| 166-170 | £300 | £210 | £500 | £140 |
| 171-175 | £300 | £210 | £800 | £140 |
| 176-185 | £355 | £230 | £800 | £140 |
| 186-190 | £500 | £270 | £800 | £140 |
| 191-200 | £500 | £270 | £1200 | £140 |
| 201-225 | £650 | £295 | £1200 | £140 |
| 226-255 | £885 | £500 | £1700 | £140 |
| Over 255 | £1120 | £515 | £2000 | £140 |
*cars over £40,000 pay £310 supplement for 5 years
What has changed as part of the VED reform?
- The threshold for £0 tax has been significantly reduced to apply only to zero-emission cars
- The standard rate, or subsequent rate as it’s referred to, is now set at a flat charge of £140 across all CO2 bands, except for zero-emission cars which is £0
- There is a new supplement charge of £310 to be added to the subsequent rate, for five years, for cars with a list price of over £40,000. The list price is the vehicle purchase price, including all added options and VAT.
- The new system is only applicable to vehicles registered from 1 April, 2017. All cars registered before this will remain in the current/outgoing VED system
How this affects fleet?
From 2017, contract hire providers like Sandicliffe Motor Contracts will allow for the tax increase in our quotations, assuming that vehicle deliveries will fall after 1 April, 2017.
Broken down, the first year rate will be included in the vehicle cost and the standard rate will then be absorbed into the maintenance budget for the remaining years of the lease.
Please note, these charges are unavoidable and will be applied across the industry.
Our advice
- Many businesses already cap their fleet policies to only offer cars with no more than 130g CO2/km, which is still good working practice
- Avoid where possible of exceeding 150 g CO2/km as first year payments jump significantly from £200 to £500
- Keep vehicle value under £40,000 where possible – look at a reduced spec or removing a couple of added options
Here are a few VED examples, based on a 36-month contract:
The same car with a higher spec, and in turn moving the list price to exceed £40,000 would almost double the amount of tax over the three years. Broken down, this could add almost £20 to the monthly rental figure. For more advice and examples, take a look at our more in depth VED Guide.
Finally, our list top 10 ULEVs for 2017 may be a good way for you to start exploring ULEVs. The aim of reforms such as this one is to get us using cleaner, more efficient vehicles. Businesses will be rewarded in tax relief by phasing out the fuel guzzlers. For the official line, visit gov.uk.
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