We were looking at buying property at auction for last week's Finance Fridays. For this week we are going from houses to vehicles. From 1st April 2017 a whole new banding system is coming into place to determine what VED will be payable on new cars.
VED stands for Vehicle Excise Duty. It is more commonly known as 'Car Tax' or 'Vehicle Tax'. I will say it is not a 'road tax' as that was abolished by Winston Churchill in 1937. The money raised from VED is not ring-fenced for paying for the upkeep of the roads. It is a tax on vehicles and the funds raised go into the general pot with all the other taxes. The way that VED is calculated is based on either engine size or fuel type and CO2 emissions. The new rules primarily affect new cars registered after 1st April 2017. However, it it worth looking at all the VED bands if you are thinking about changing your car this year whether it will be a new or second-hand vehicle.
Since new cars have got more efficient over the years and more environmentally friendly the government has found it has been collecting less and less tax on vehicles based on their emissions. This is why they have decided to bring in a different system for new cars. If you are thinking of buying a new car it may be more cost-effective in the long run to close the deal and get it registered by next Friday, 31st March. If that's too soon then perhaps you could look into buying a pre-registered vehicle.
For new cars registered after 1st April 2017 the first 12 months VED will be based on what CO2 emissions it emits and whether it is a petrol/diesel car or uses an alternative fuel such as hybrids, bi-ethanol and liquid petroleum gas.
|CO2 emissions (g/km)||Petrol and diesel cars||Alternative fuel cars|
After the first year the VED becomes a flat rate for each year after (or until the next revision of VED rates) depending on the type of fuel it uses.
|Electric vehicle||Alternative fuel||Petrol or diesel|
There will be a different rate for cars registered after 1st April 2017 with a list price (this is the official published price before any discounts) of £40,000. This additional charge is applicable for the next five years after the car is registered
Do you check the VED of a car before you buy it? Are you thinking of buying a new car this year?
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