VED Changes - April 2017

This April sees a massive shake-up in the way Vehicle Exercise Duty is being calculated, with the Government attempting to reduce the average CO2 levels in our cities.

The current VED bands were formulated on what was the then CO2 average of 178g/km. Today, that average is now 122g/km; however, the Government wants to lower that further toward a target of 95g/km.

What are these changes?

For starters, these changes will only affect new cars registered on or after April 1; purchasing a used car after this date will go by the existing VED rules. Any new car registered before April 1 will also be subject to the current rules.

However, when these VED changes do come into effect, most new cars will be affected - even if it has CO2 emissions lower than 100g/km. Also, emissions now only play a part for only the first year of VED, while only fully electric vehicles will escape the cost of VED - initially, at least.

Ignoring electric-only vehicles for now, new bands have been set up where the cost of VED in the first year is as low as £10 for emissions between 1-50g/km and as high as £2,000 for those emitting over 255g/km. Vehicles that are classed as utilising alternative fuels (hybrids, bi-ethanol and liquid petroleum gas) are subject to a £10 deduction in cost.

After the first year, the vast majority of vehicles will be subject to a standard £140 annual rate, regardless of CO2 emissions; again, alternative fuelled vehicles are given a £10 discount. Fully electric vehicles remain uncharged if they aren’t affected by the following.

If the vehicle costs over £40,000, it will be subject to an additional yearly rate of £310 - regardless of how the vehicle is powered. This additional rate comes into effect after the first year is complete and lasts for five years (so a total cost of £1,550 for this rate alone).

How do these changes affect me?

How the VED changes will affect you will firstly depend on your car’s engine emissions. While many people at the moment can benefit from not having to pay for VED (<100g/km cars), these new rules will arguably have the biggest affect on these vehicles.

A vehicle emitting emissions between 1-50g/km, for example, will go from paying nothing at all to £10 in their first year and then the subsequent standard rate of £140 for every year that follows. This would result in a three-year cost of £290 (1x £10 + 2x £140).

Even a vehicle emitting the now average 122g/km will be subject to a £160 charge in the first year and then the £140 standard rate. Again, alternatively fuelled vehicles are subject to a slight deduction.

Fully-electric vehicles will escape any charge as long as they cost under £40,000. Those costing over this amount will pay nothing in the first year, but then be subject to the additional rate of £310 for the five years following that. However, they would avoid the £140 standard rate.

I’m thinking about buying a new Ford - when should I buy it?

In most cases you will see an increase in VED costs across the Ford range, but how much of an increase will depend on which vehicle interests you.

The Ford Fiesta 1.0 EcoBoost has below-average emissions of 99g/km and today enables you to have this car free of VED costs. After April 1, that car would cost you an initial £120 for your first year’s rate and then the standard rate of £140 from the second year on. This would result in a three-year cost of £400 compared to the £0 it currently costs.

Other instances, such as the new Ka+, can potentially see a 598 per cent increase over three years (£163 to £440). The Mondeo 2.0 Duratorq, meanwhile, would have a 900 per cent increase over the first three years of ownership (£42 to £420).

It is thought that around 70 per cent of vehicles will be affected in a negative way by the new VED changes, so those in the market for a new Ford could very much benefit from making their purchase before the changes in April.

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