Vehicle Excise Duty is changing from 1st April 2017

Vehicle Excise Duty is changing from 1st April 2017

Changes to the way VED (Vehicle Excise Duty) or road tax is calculated will be changing for certain vehicles that are registered on or after 1st April 2017.

A new report, commissioned by the BVRLA suggests the increased rates proposed by the Government will unfairly impact the vehicle rental industry, causing its overall VED Bill to rise by 400%. FleetEurope’s rental partners have increased their charge for Road Fund Tax (RFL) / Vehicle Excise Duty (VED), which has resulted in an amendment to FleetEurope’s RFL/VED charges for cars. Commercial vehicle RFL/VED charges are not affected by these changes.

How is the VED calculation changing?

The changes to road tax were announced by former Chancellor of the Exchequer, George Osbourne, in response to a rise in low-emissions vehicle ownership.

The current VED calculations, based on 13 tax bands, exempt cars with CO2 emissions up to 100 g/km from paying any road tax. This means most new cars being registered are currently paying little to no road tax at all, resulting in a decline in tax revenue for the treasury.

On 1st April 2017 the new VED calculations will fall into two separate rates. The First Year Rate (first licence period) will vary according to the CO2 emissions of the vehicle and will be paid during the first year of registration. A flat Standard Rate (second licence period) of £140 will apply annually thereafter.

Only cars with no tailpipe emissions (electric and hydrogen) will be exempt from paying road tax. There is also a new five-year supplement of £310 being introduced for cars with a list price (P11D) of more than £40,000. This supplement includes zero emission cars and is to be paid annually for five years following the first year.

It’s important to note that new cars registered before 1st April 2017 and commercial vehicles, which do not exceed 3,500 GVW (Gross Vehicle Weight) will not be affected by these new VED rules.

The table below shows the new calculations in more detail:

VED Bands (From 1st April 2017)

*Cars with a list price (P11D) of over £40,000 when new pay an additional rate of £310 per year on top of the standard rate, for five years.

How will these changes affect you?

When you lease a vehicle, the VED is included in the monthly payments. If the vehicle is registered on or after 1st April 2017, the VED rate used to calculate the monthly payments may change. Typically, a vehicle is registered on the day it is delivered, which means the actual registration date for the vehicle will be determined by the dealership supplying the vehicle.

If the vehicle is scheduled for delivery before 1st April 2017 and is delayed beyond this date due to manufacturer issues, the monthly payments may change.

Current vs New VED Scheme Comparison

Below is an example showing how the calculations between the current and new VED schemes differ for four separate vehicles, leased over a 36 month period.


If you have any questions regarding these changes, please call the FleetEurope operations team on 01494 435000 or e-mail: