VED Road Tax Changes Guide for Car Dealers
30th January 2017
Dealer Management System provider Dragon2000 explains the new Vehicle Excise Duty (VED) changes which come into force for new vehicles first registered from 1st of April 2017, telling motor dealers everything they need to know about the restructure, and the introduction of an additional tax on cars with a list price of over £40,000.
“But I sell used cars, what has new car tax rates got to do with me?” we hear you cry.
The new rules regarding additional tax, which lasts for five years, will clearly have implications for used car dealers both in the short term and in the future, and is explained in detail later in this article.
Still commonly referred to in the motor trade and by the public as “Road Tax” the current VED bands and rates were first introduced back in 2001, with cars producing under 100gCO2/km paying no tax at all.
However with more and more cars falling under the 100gC02/km band as car manufactures’ strive to meet the EU target of ensuring their vehicles produce no more than 95gC02/km by 2020, it was announced during the 2015 Summer Budget that there would be an overhaul of the current VED system, with only zero-emission electric cars with a list price of under £40,000 now set to be tax-free.
VEHICLES REGISTERED BY THE END OF MARCH 2017 – NO CHANGE
Vehicles currently registered or new vehicles first registered by the end of March this year will be unaffected and will remain on the current VED bands and rates – but these rates will probably rise in future.
The new rates only affect vehicles where its first registration date is on or after 1st April 2017.
VEHICLE EXCISE DUTY RATES FROM APRIL 2017
All new cars first registered on or after 1st April 2017 will attract a first year rate based on 13 bands of CO2 emissions.
After the first licence expires (or sooner if the vehicle is sold on within the first 12 months, which requires the vehicle to be taxed again, as remaining tax cannot be transferred to a new owner) the amount due the second time the vehicle is taxed will be a standard annual rate depending on the type of vehicle fuel. The annual rates will be petrol or diesel vehicles at £140, alternative fuel vehicles at £130 and electric vehicles at £0.
NEW VEHICLES COSTING OVER £40,000
Vehicles with a list price of over £40,000 will have a tax rate based on emissions the first time it is taxed. The second time it is taxed it will be subject to the standard annual rate depending on fuel type AND an additional rate of £310 a year for the next 5 years.
Fuel Type Standard annual rate Additional rate Total annual payment
Electric £0 £310 £310
Alternative £130 £310 £440
Petrol or Diesel £140 £310 £450
This tax applies to the vehicle itself, so when the car is sold on and becomes a used vehicle, subsequent owners must pay the additional tax on top of the standard annual rate until the five years is up.
LIST PRICE DEFINITION
The list price is the manufacturer’s published recommended retail price (RRP), plus any factory fitted extras. It also includes VAT, delivery charges and pre-delivery inspection charges. It does not however, include any dealer-fitted extras, the first registration fee or the cost of the first year’s vehicle tax.
It is important to note it is not the price the customer actually ends up paying for the vehicle, it must be the total list price before any discounts or incentives. It is also not the price at the time the vehicle was ordered – it must be the current list price of the vehicle on the day before it is first registered. The list price of each new vehicle will be provided by the manufacturer during the automated registration process via the AFRL system.
USED VEHICLES SUBJECT TO ADDITIONAL TAX – END DATE CAN VARY
The 5 year period that applicable vehicles will be subject to the additional tax starts when the vehicle is taxed for the second time, which could be any time within the first 12 months if the vehicle is sold by the first owner, as unexpired tax cannot be transferred to subsequent owners.
- If a vehicle subject to additional tax is sold 3 months after its first registration date and taxed for the second time by its new owner, the additional rate period would end 5 years and 3 months after first registration.
- If a vehicle subject to additional tax is kept by the first owner and taxed for the second time when the first year’s tax expires after 12 months, the additional rate period will end 6 years after first registration.
Used car dealers should therefore not assume that a vehicle will be subject to the additional tax until the vehicle reaches 6 years old from its first registration date – it will not always be the case.
USED CAR DEALERS BEWARE
Vehicles subject to the additional tax rate that are sold on before its first year tax is up are likely to end up in the hands of used car dealers in a matter of just a few months – so used car dealers need to understand the changes now.
Fast-forward a few years, and vehicles between 5 and 6 years old may not necessarily still be subject to the tax if their 5 years is up. If comparing two used cars of the same age and spec compared, if one costs £310 more than the other to tax upon buying it, this can easily influence a potential buyer’s decision. Used car dealers need to ensure they check for this information so they can correctly advertise their vehicles, be aware when buying used vehicles for stock, and ensure their customers are also aware as it could affect the deal.
HOW TO CHECK IF A USED CAR IS SUBJECT TO THE ADDITIONAL TAX RATE
Used car dealers will be able to look up tax rate information from the DVLA using the Government Website Vehicle Information Service, and it will also appear on the V5C Vehicle Registration Certificate and the New Keeper Supplement within the notes whether there is any additional rate of tax left to pay and the scheduled end date.
OUR DEALER MANAGEMENT SYSTEM USERS
We already accommodate vehicle tax bands and rates within the DragonDMS, and when the VED changes come into force on April 1st 2017 the standard rate calculation will be updated within our Dealer Management System. Additional rates must be checked for as advised above, and entered manually.