Changes to VED bands in 2017: What it means for you

George Osborne has announced a complete overhaul of the British road tax system, with VED now being used to pay for improving and maintaining the roads for the first time since the 1930s.

As a result, from 1 April 2017, all new cars will be taxed against three new VED bands, which will separate zero emission vehicles from standard and premium cars. This means future taxation will be calculated against a combination of CO2 emissions and the list price of a car.

The new VED system follows some significant changes in the way people tax their cars, with the paper disc scrapped in 2014 in favour of a new electronic system. However, with George Osborne labelling the current system 'unfit for purpose', this is the first time in a generation that the VED bands have been given a complete overhaul.

How will the new VED rules affect me?

For now, they won't. The current VED bands remain in place for all pre-2017 cars and the new rules will only impact vehicles bought and registered from 1 April 2017. 

Will electric car owners have to pay road tax? 

No. Electric vehicles will continue to qualify for zero-VED for the foreseeable future.

Tell me about the new VED bands

They're surprisingly simple. 'Zero' emission cars pay nothing, 'Standard' cars pay £140 a year and anything that costs more than £40,000 to buy will cost £140 a year, plus an additional £310 pa for the first five years. 

So owners of expensive cars are going to be worse off?

Some will, especially those who own expensive hybrids, although George Osborne claims that 95 per cent of car owners will pay £140 a year. 

How will this impact owners of hybrids or low emission vehicles

If you buy a hybrid or other vehicle with emissions below 100g/km after April 2017 you will have to pay £140 a year in VED. If it costs more than £40,000 to buy then that will come to a total of £450 a year. However, if you already own a hybrid (or buy one before 1 April 2017) you will continue to pay nothing.

Is the government going to make more money out this new system?

They assure us they won't, but we're not so sure because there's a LOT of low emission cars that will fall into the £140 a year in VED bracket. There is some good news though, all of the money raised from VED will eventually be used to improve the UK's road structure. 

What about vans?

VED for commercial vehicles remains unchanged, for now.

And classic cars? 

No change there either. They will continue to pay the standard VED rates for pre-2001 cars.