2018 VED Tax Changes - How will it affect you?

2018 VED Tax Changes: Explained

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April 2017 saw a major overhaul of the UK’s vehicle excise duty (VED) system, otherwise known as ‘road tax’. Many new vehicles that would previously have been exempt were no longer so, and higher charges were raised on vehicles with greater CO2 emissions.

Further changes are set to be implemented from April 2018. Here, we’ll explain what happened in 2017 and what changes are in the pipeline this year.

What changed in 2017? 

Under the previous system, ultra-low emissions vehicles (ULEV) – those emitting less than 100g/km in CO2 – were free to tax. Understandably, this was a policy implemented years back when the government sought to incentivise these vehicles, but this has been a victim of its own success. With manufacturers now producing more of these low emissions vehicles across all classes and body types, and the British public snapping them up, the government saw road tax revenues begin to fall.

As a remedy for this, the system by which new cars are taxed was altered, and now only zero-emissions vehicles find themselves exempt. All other vehicles are now taxed on a thirteen-band scale in the first year, directly reflective of how much CO2 they emit. For those not exempt, this can range from as little as £10 for petrol and diesel cars emitting 1-50g/km, up to £2,000 for those over 255g/km. Within each band, alternative fuel cars receive a £10 discount.

First year charges:

CO2 emissions (g/km)

Petrol and diesel cars

Alternative fuel cars

0

£0

£0

1 - 50

£10

£0

51 - 75

£25

£15

76 - 90

£100

£90

91 - 100

£120

£110

101 - 110

£140

£130

111 - 130

£160

£150

131 - 150

£200

£190

151 - 170

£500

£490

171 - 190

£800

£790

191 - 225

£1,200

£1,190

226 - 255

£1,700

£1,690

Over 255

£2,000

£1,990


From there onwards, most drivers will be charged a flat rate of £140 each year. Alternative fuel cars will continue to receive their £10 discount (so pay £130 a year), while zero emissions vehicles will remain exempt and pay nothing.

Annual rates, after first year:

Zero emissions cars

£0

All emissions; petrol and diesel cars

£140

All emissions; alternative fuel cars

£130


However, things are slightly more complex if the list price of your vehicle is more than £40,000. Regardless of your emissions, you’ll receive a £310 additional charge for the first five years of the car’s life after the first year, on top of the flat rate that all drivers must pay.

Annual rates, after first year, for vehicles with a list price over £40,000:

Zero emissions cars

For five years, after the first:

£310

Thereafter:

£0

All emissions; petrol and diesel cars

For five years, after the first:

£450

Thereafter:

£140

All emissions; alternative fuel cars

For five years, after the first:

£440

Thereafter:

£130


What changes are being introduced in 2018?

You may have seen in the news that diesel cars are under the spotlight. With many diesel models found to be posting harmful NOx emissions scores, the government has moved to discourage the worst offenders, targeting those that don’t meet the latest Euro 6 Real Driving Emissions (RDE) Step 2 test. This means new diesel cars face being notched up a band in their first-year tax if they release over 50% more than the 80mg/km NOx limit under real-world driving conditions. 

2018 changes to first year VED rate for diesel cars not meeting Euro 6 RDE standards:

CO2 emissions (g/km)

Current first year VED rates for diesel cars

New April 2018 VED rates for diesel cars not meeting Euro 6 RDE standard

0

£0

N/A

1 - 50

£10

£25

51 - 75

£25

£100

76 - 90

£100

£120

91 - 100

£120

£140

101 - 110

£140

£160

111 - 130

£160

£200

131 - 150

£200

£500

151 - 170

£500

£800

171 - 190

£800

£1,200

191 - 225

£1,200

£1,700

226 - 255

£1,700

£2,000

Over 255

£2,000

TBC


It’s important to remember that any changes to VED are non-retrospective, and only apply depending on when your car was first registered. If your car was on the road before 1st April 2017, none of these changes will apply. And if your car is relatively new, or you’re due to pick up your keys before 1st April 2018, the changes to VED for heavily-NOx-emitting diesel cars won’t apply either. But if you’re considering purchasing a new diesel vehicle in the coming months, these changes will likely affect you, and you may want to bear them in mind when choosing your model. 

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