Road Tax Changes Explained

Thinking of buying a new car? Then hold your horsepower until you’ve read this article – it could save you some cash.

Thanks to upcoming changes to Vehicle Excise Duty (that’s ‘road tax’ to you and me), you could be facing a nasty and unexpected bill if you buy a new car after 1st April this year.

On the other hand, if you buy a car before 1st April, you could actually end up saving a nice wodge of cash.

Clear as mud? I thought so. And it gets muddier.

At the moment, most cars pay Vehicle Excise Duty (VED). They are allocated to a tax band, depending on engine size and CO2 emissions.

If the authorities decide that your car is in the ‘low’ or ‘zero’ emissions category, then you win and pay no tax whatsoever.

But here’s the kicker. Go and buy yourself a ‘low emissions’ car after April, and you get slapped with a bill for VED.

So what on earth is going on? Let’s take a look.

What happens on 1st April?

The new tax system comes into force for all vehicles registered on or after this date. Any car you currently own or register before that date, will be taxed under the old system – so you won’t pay any less or more, regardless of engine size or CO2 emissions.

How does the new road tax system work?

The new system is based on CO2 emissions, and every new car will be allocated to one of 13 bands – ranging from vehicles that have zero CO2 emissions, right up to those that emit more than 255 g/km of carbon dioxide.

Depending on which band your car is in, you pay a special first year rate of tax, ranging from £0 (for zero emissions cars) up to an eye-watering £2,000 for those that belch out the most CO2.

After that first year, you pay a flat rate of £140 per year, no matter what band your car is in (unless is it rated as zero emissions, when you pay nothing).

If you’re interested in the exact figures, here they are.

Emissions (g/km) of CO2

First Year

Standard Rate





































Over 225



There’s another hidden surprise, too. If the list price of your car is £40,000 or more, you have to pay a £310 supplement for five years – or an extra £1,550. And there’s no getting round it by negotiating a deal where you buy the car for £39,999 – the Chancellor couldn’t care less, and will demand his cut based on the list price.

Real world example

So let’s take a real world example. If you buy a VW Passat 1.6 TDI S with CO2 emissions of 105g/km before 1st April, you will pay £0 road tax for the first year under the old system, followed by £20 per year after that. If you register it on or after 1st April, you’ll pay £140 in the first year and £140 for each year after that. It’s a massive hike.

So if that’s the car of your dreams, buy it now – not after April. If you do, it’s akin to flushing hundreds of pounds down the drain.

Ironically, smaller, less polluting and more economical cars will be hardest hit by the changes to the VED rules. More polluting cars will take a larger hit in the first year, but then their annual tax will drop to only £140 – much cheaper than under the current system.

The worst hit will be owners of expensive zero-emissions vehicles. You might not pay any road tax, but if the list price of the car is £40,000 or over, then you’ve got that chunky £310 supplement to find for the first five years.

So what next?

In a nutshell, if you are planning to buy a car, do your research now. In many cases it will be significantly more expensive to tax if you register it before 1st April. On the other hand, if you have your heart set on a relatively inexpensive gas guzzler, it may be cheaper in the long term to register it after 1st April – as long as you can take the bigger tax hit in the first year.

Either way, do your sums. And if the figures are enough to drive you mad, have a chat with one of our accountants – they’d be more than delighted to help.