What Are the New DVLA Car Tax Rules?

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What Are the New DVLA Car Tax Rules?

The new DVLA tax rules came into force on April 1 2017, following a big shake-up of the Vehicle Excise Duty (VED) system. Here’s everything you need to know about the new DVLA tax rules.

What is the DVLA tax?

The Driver & Vehicle Licensing Agency is an executive agency that issues licences, sells personalised registrations, collects taxes on vehicles and more. There is a vehicle tax rate based on the vehicle’s CO2 emissions the first time it’s registered.

The Vehicle Excise Duty (VED) is commonly known as a car tax or a road tax. Car owners are required to pay this, and they obtain a tax disc proving their compliance.

What are the new DVLA car tax rules?

If you’re buying a new car, you’re likely to pay more tax than in previous years. What’s more, fewer cars will now be exempt from vehicle tax.

Under the old rules, all cars paid a rate of vehicle tax based on their fuel type and CO2 emissions. New cars tend to have much lower emissions than older cars due to legislation. Under the old VED system, many new cars didn’t attract any vehicle tax at all.

The new DVLA tax rules separate the first-year rate from the tax you pay in later years.

What is the first DVLA tax payment?

The first tax payment is due when you first register your car. It covers your vehicle for 12 months. The rates are:

CO2 Emissions (g/km)Petrol CarsDiesel CarsAlternative Fuel Cars
0£0£0£0
1 - 50 £10£25£0
51 - 75£25£105£15
76 - 90£105£125£95
91 - 100£125£145£115
101 - 110£145£165£135
111 - 130£165£205£155
131 - 150£205£515£195
151 - 170£515£830£505
171 - 190£830£1,240£820
191 - 225£1,240£1,760£1,230
226 - 255£1,760£2,070£1,750
Over 255£2,070£2,070£2,060

How much is the DVLA tax?

From the second year onwards, you’ll pay DVLA tax as follows:

Fuel TypeSingle 12-month PaymentSingle 12-month Payment by Direct Debit12 Monthly Payments by Direct DebitSingle 6-Month PaymentSingle 6-Month Payment by Direct Debit
Petrol or Diesel£140£140£147£77£73.50
Electric£0£0£0£0£0
Alternative£130£130£136.50£71.50£68.25

Any additional taxes?

If you buy your car for more than £40,000, you’ll also have to pay an additional £310 for five years (on top of the standard rate). The additional tax means that your DVLA tax from year two to year six would be as follows:

Fuel TypeSingle 12-month PaymentSingle 12-Month Payment by Direct Debit12 Monthly Payments by Direct DebitSingle 6-Month PaymentSingle 6-Month Payment by Direct Debit
Petrol or Diesel£450£450£472.50£247.50£236.25
Electric£310£310£325.50£170.50£162.75
Alternative £440£440£462£242£231

After the five years are up (when the vehicle is seven years old), the standard rates will apply.

Winners and losers of DVLA: Which cars not to buy

If you’re buying a small, fuel-efficient or hybrid car, you’ll be significantly worse off. For example, if you’re buying a Peugeot 208 1.2 PureTech (82) Allure today, it’ll cost you ten times more in vehicle tax over the first three years than before the new rules came into place.

Premium electric cars, such as the Tesla Model S will also lose out. You’ll still pay no road tax for many electric vehicles because the list price of the car is over £40,000. Although, You’ll have to pay the £310 additional rate. Over five years, this adds up to £1,550.

Ironically, high-emitting vehicles, such as sports cars and SUVs could work out cheaper. Provided they’re under £40,000, and you’re planning to hang onto them for a while. Although you’ll pay more in the first year, for subsequent years, you’ll pay significantly less under the new scheme.

Do the new DVLA tax rules apply to old vehicles or company cars?

The new DVLA tax rules only apply to cars (and some motorhomes) that are first registered with the DVLA on or after 1 April 2017. If you re-register a vehicle that is currently declared off the road (SORN), the new rules won’t apply as long as the vehicle was first registered with the DVLA before this date.

A different set of rules applies to company car taxes. You’ll want to take the new DVLA tax rules into account when calculating the costs of using a company car or a car allowance to buy a new car.

Andre Spiteri

André Spiteri is an expert fintech copywriter with a passion for making personal finance simple and accessible to everyone. Formerly a financial lawyer, he now helps fintech businesses establish their authority online and make more sales through the power of words. Head over to MaverickWords.com to learn more.

MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.

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