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17th Oct 2017 - Contract hire and leasing, hire vehicles, commercial and fleet specialists – LVS look after all your motoring needs!

Vehicle tax (VED) is changing

VED (Vehicle Excise Duty) more commonly known as Road or Vehicle Tax is having a significant shake up with new rates coming into effect from 1st March 2017.

The changes, announced by the Chancellor in the 2015 budget, set out that the amount of VED you pay will be calculated on the vehicle's CO2 emissions. However, while the government has been trying to push people into hybrid vehicles by making many of them free to tax, the benefit of choosing one will be substantially reduced after 1st April 2017.

New cars will still be divided into 13 different CO2 bands, which will determine how much you pay in the first year of ownership, but only zero-emission vehicles, such as electric cars, will qualify for the lowest band and therefore be tax-free.

In simple terms, the lower the car's emissions, the lower the vehicle tax band and the less you pay.

Bear in mind these new VED rates only apply to a car registered on or after 1st April 2017. Any vehicle registered before that date will use the old VED bands (or if registered before the 1st of March, 2001, the even older system). It is worth noting on top of the new VED rates, if a vehicle’s list price is over £40,000 at first registration, you will pay a premium rate between £310 - £450 a year for 5 years regardless of the vehicle's emissions.

We have tried to reflect the difference these new rates will have on each CO2 band below;

*Standard rate applies to cars with a list price up to but not including £40,000 from year two onwards.
**Premium rate applies to cars with a list price of £40,000 or more from year two to year six. Note that the rates shown in the table are likely to be increased slightly each year by the RPI to account for inflation.
Sources: Budget 2015, Budget 2016, DVLA 2017.

So how is this going to impact on Contract Hire and Leasing?
If you have a current car or van lease, business or personal contract hire or currently in the process of acquiring one that is guaranteed to be registered and delivered before the 1st April 2017 then lucky for you the new VED rates will not affect the current price agreed. However, it will definitely be worth considering the CO2 emissions when you are looking to change vehicles or when you are due to take out a new lease on a vehicle.

After 1st April 2017 it all becomes swings and roundabouts as the funders that generate the prices for leasing and contract hire vehicles aim to protect themselves against the hit of the increased VED rates. Therefore it is likely monthly prices will also increase to reflect these new rates. However it doesn't automatically mean bad news, for example, a Peugeot 208 1.2 PureTech Allure currently costs £40 in tax over 3 years and will cost £420 under the new rates but then compare that to a SEAT Alhambra 1.4 TSI which will only see its 3 year tax increase from £435 to £480. Essentially, the CO2 emissions figure will become a more important factor when deciding on your new vehicle and has the potential to save you a lot of money from premium rates.

If you have any further concerns about the road tax situation regarding a car or van you have on lease or order with us, feel free to contact us on 01253 723769 for more information.

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Posted on 24th January 2017 at 2:51 PM

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