An overhaul of the road tax system from April 2017 will mean that purchasers of new cars valued over £40,000 will face a five-year charge in addition to the annual road tax rate, which is set on a sliding scale
The measure was first announced in 2015 and will affect purchasers of cars first registered from 1 April 2017 onwards.
The aim is to encourage the purchase of low-emission vehicles and under the new system, first year rates of vehicle excise duty (VED) will vary according to the carbon dioxide (CO2) emissions of the vehicle.
A flat standard rate of £140 will apply in all subsequent years, except for a £0 rate for zero-emission cars. Cars registered before 1 April 2017 will remain in the current VED system, which will not change.
Anyone purchasing a car above a list price of £40,000 will be most affected by the changes as they will have to pay a £310 supplement on top of standard VED rates for the first five years of ownership.
The revised road tax rates are expected to raise £195m in year one of operation 2017/18, rising to £1.4bn by 2020/21.
The current VED structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178 gCO2/km.
The Band A threshold of 100 gCO2/km below which cars pay no VED was introduced in 2003 when average new car emissions were 173 gCO2/km. Since then, to meet EU emissions targets average new car emissions have fallen to 125 gCO2/km.
Under the current system, the average annual VED across all UK motorists is £166. In the new system most motorists will be paying an annual VED payment of £140.
The new rates and bands for the post-2017 VED system are set out in the table below:
| New VED system - for cars registered from 2017 | ||
| Emissions (g/CO2/km) | First year rate | Standard rate* |
| 0 | £0 | £0 |
| 1-50 | £10 | £140 |
| 51-75 | £25 | £140 |
| 76-90 | £100 | £140 |
| 91-100 | £120 | £140 |
| 101-110 | £140 | £140 |
| 111-130 | £160 | £140 |
| 131-150 | £200 | £140 |
| 151-170 | £500 | £140 |
| 171-190 | £800 | £140 |
| 191-225 | £1,200 | £140 |
| 226-255 | £1,700 | £140 |
| over 255 | £2,000 | £140 |
| * cars over £40,000 pay £310 supplement for five years | ||
Source: HMRC