From April 1st 2017, car and van owners will face brand new tax (VED) changes on any brand new vehicle. This could potentially lead to an increase in annual motoring costs, depending on a variety of factors. It’s safe to say we were confused about the changes at first! We wanted to know how it affected you and our beloved car leasing product.

With the lack of readily available information online, we’ve decided to tackle this subject ourselves. We decided to contact the big dogs at the Driver and Vehicle Licensing Agency (DVLA) to get the key facts.

The way the old system worked meant that your annual tax was calculated on how harmful your car was towards the environment. It didn’t take into account the price of the vehicle, the engines or what fuel it takes. What mattered most was how much Carbon Dioxide your car produced, the lower the number, the lower the tax bracket.

So it meant that any cars that are within 100g/KM CO2 are exempt from annual car tax. Then cars that produce over 255g/KM are capped at £515.00 per year. Anything in between this is grouped and charged accordingly.

So, what are the changes? 

However, for any brand new car registered on or after 1st April 2017, tax rates will still “consider” the emission (Co2) amounts but the annual cost will differ between the first five years. Within the first year of a car’s life, the Road Fund License (RFL/VED) will be calculated entirely on what the emission level is for that specific car.

It’ll start at £0 for electric vehicles producing no emissions and will capped at £2,000 for the highest polluting vehicle.

Second Year+

After the first year is over, the amount of tax is then capped and split into three brackets, which are:

  • £140 a year for diesel or petrol fuelled vehicles.

  • £130 a year for alternative fuelled vehicles such as Hybrids, Bioethanol and LPG

  • £0 a year for vehicles producing absolutely zero CO2 emissions

The biggest change will affect vehicles with a list price of over £40,000. Vehicles within this price bracket will be charged an additional rate of £310 a year, regardless of emissions produced. The cost will then be applied for the next 5 years. After year 5, the charge will no longer be applicable and will drop into the standard brackets (where applicable) above.

What does this mean for Car Leasing?

Luckily, with any sort of contract hire lease offer, the road tax is included throughout the full duration of the lease. Your monthly rental will also remain fixed until the end of your lease. So if there was a tax increase on a vehicle similar to yours, you will not be affected by these changes. Leasing a car means you’ll never have to deal with the hassle of renewing or dealing with road tax again, as this will all be taken care of!

Take a quick look at our latest and best car leasing offers here. 

Or alternatively, email us at or call 0844 846 4007 for your own personalised quote today.

Categories: Information

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