New flat rate road tax system from 2017

Road taxes on luxury cars and eco-friendly hybrids will be hiked under radical new reforms to help fund road-building schemes, George Osborne has announced.

Chancellor of the Exchequer George Osborne has revamped the road tax system. From 2017 nearly all new car buyers will pay £140 a year, while owners of £40,000 vehicles will pay an additional £310 per year. The only exception from the new rules are electric cars that emit zero emissions - they pay zero VED. 

Currently a quarter of all cars are exempt from vehicle excise duty because of their low CO2 emissions. Osborne said this meant middle class motorists with expensive cars were avoiding road tax while poor families stuck with polluting old models were paying hundreds of pounds a year. The Chancellor’s new system will come into force in 2017, which will see 95 per cent of new cars paying £140 a year - less than the average £166 paid today. The only exception from the new rules are electric cars that emit zero emissions - they pay zero VED. 

The good news for anyone who currently owns a low emissions SKODA is that the charges only apply to new cars from 2017. There will be no change to VED for existing cars so no one will have to pay more tax than they currently do if they keep the same car.

So what does this mean for the ordinary motorist? Well there is some slight consolation in that VED will now be put toward the use it was originally intended for - paying for roads. So once again we can legitimately refer to it as 'road tax'.