Taxi and Chauffeur industry is going to be hit hard by new road tax rules

New rules from the DVLA applied to all new cars from 1st April 2017 will cost passenger transport industry millions


The government’s decision to change the road tax system in the UK will hit the passenger transport industry, specifically those purchasing or leasing vehicles that cost over £40,000. These new rules will hit taxi drivers who purchase the famous London Taxi where prices for a TX4 Euro 6 auto cost over £41,000.

But it is not only taxi drivers who will be hit hard in the pocket. Chauffeurs or executive hire services who buy or lease executive vehicles, such as Mercedes S Class, Audi estate cars, Volvo S90 or V90’s will also find themselves seeing their annual road tax costs substantially increase.

When the outgoing system was conceived, taxation was linked to a car’s CO2 output – this meant that cheaper, more efficient cars paid a relatively small amount while pricier, more polluting cars paid much more.

Due to advances in engine technology and software (depending if you bought a certain brand of vehicle,) CO2 emissions have dropped across the motor industry. This improvement hit the governments coffers hard, resulting in more and more vehicles either dropping out of an annual charge or being in the lowest band.

The problem with this system emerged when it became clear to the treasury that, thanks to greatly improved engine and vehicle design, many normal cars were emitting such little CO2 that they actually fell into the tax-free bracket. This lowest band was originally intended for electric, hybrid and niche low-emission cars but, more conventional cars wound up here and paid no tax.

To bolster its cashflow, the government has introduced this new taxing regime to push more conventional cars back into taxation and reserve tax-free status for a handful of zero-emission cars.


What are the 2017 road tax changes?

As before, you’ll have to pay a first year tax rate that’s linked to the car’s CO2 emissions, followed by a standard rate for each year after that. The standard rate for every car is £140 per year but models costing more than £40,000 (after options) will incur an additional £310 cost, meaning most premium models will now cost £450 in total per year to tax.

Any zero-emissions vehicle – i.e. electric cars – won’t incur either the first year or standard rate of tax but, unlike previous years, this no longer applies to plug-in hybrid models that still use a conventional combustion engine. If, however, your zero-emission vehicle costs more than £40,000 – such as a Tesla Model S – you still incur the £310 additional cost for the first five years of ownership before returning to tax-free status.

As before, tax is no longer transferrable between owners. This means if you sell your car, the new owner will have to tax it themselves – any remaining tax on the vehicle can be claimed back from the government. Also unchanged is the £10 reduction in tax rates for alternative fuel vehicles such as those converted to run on LPG.


2017 UK road tax bands

Here are the new road tax bands in full:

VED bands for cars registered on or after 1 April 2017
CO2 emissions (g/km) First year rate Standard rate (year two onwards) Standard rate (year two onwards) for cars costing >£40,000 – payable for five years
0 £0 £0 £310
 1-50 £10 £140 £450
 51-75 £25 £140 £450
 76-90 £100 £140 £450
 91-100 £120 £140 £450
 101-110 £140 £140 £450
 110-130 £160 £140 £450
 131-150 £200 £140 £450
 151-170 £500 £140 £450
 171-190 £800 £140 £450
 191-225 £1,200 £140 £450
 226-255 £1,700 £140 £450
 More than 255 £2,000 £140 £450


For those in the industry that run fleets, or are able to access discounts through various trade programs you won’t escape these new rules either. The government has been quick to ensure that the small print includes the recommended retail price (RRP), for the taxation rates.

This means that if you obtain a discount of £7,000 on a vehicle that has a RRP of £45,000, you still will be liable for the new tax rates because any discount will not be taken into account.


Examples of new Vehicle Excise Duty (VED)


Tesla Model S

Tesla Model S 70 kWh D (£59,935)  |  CO2: 0g/km

Six-year VED total at 2015 rate: £0

Six-year VED total at 2017 rate: £1550

Penalty: £1550

The Tesla is an all-electric car but with a £40,000-plus list price across the range. All Tesla Model S will cost nothing in first year vehicle excise duty (VED), but thereafter will be subject to the £310 annual premium surcharge.

That’s all a Tesla buyer will pay, because as a zero emissions car, its standard rate is £0. Every other car, from 1g/km upwards, has a £140 standard rate.


BMW 530d SE Auto (£47,790)  |  CO2: 134g/km

Six-year VED total at 2015 rate: £780

Six-year VED total at 2017 rate: £2450

Penalty: £1670

The tax implication of buying a 134g/km 530d SE Auto after April 2017 will be very worrying for the chauffeur and executive hire industry – its six-cylinder diesel executive car is very popular with the industry. The ActiveHybrid 5 version, will also increase to the same tax level in 2017.

Compare that to a 525d SE, which performs almost as well as a 530d but, crucially, falls below the £40,000 premium, so from 2017 will cost just £860 in VED over six years.


Lexus LS 600h L Premier Rear Seat Relaxation (£99,995)  |  CO2: 199g/km

Six-year VED total at 2015 rate: £1755

Six-year VED total at 2017 rate: £3450

Penalty: £1695

In a blow for hybrid technology with the new budget, it’s the 199g/km emissions alone that cause the £1695 penalty – but if Lexus was to slot a lower-emitting diesel into the LS, it would save buyers an awful lot in tax. And fuel, for that matter.


Audi A7 3.0 TDI Ultra S tronic S line (£48,705)  |  CO2: 128g/km

Six-year VED total at 2015 rate: £550

Six-year VED total at 2017 rate: £2410

Penalty: £1860

That Audi 3.0 TDI is an excellent engine and well refined, but the A7 3.0 TDI emits 128g/km is very impressive indeed, but unfortunately its relatively low VED implication today will catapult after April 2017.


Infiniti Q50 Sport Tech 2.2d (£40,170)  |  CO2: 128g/km

Six-year VED total at 2015 rate: £550

Six-year VED total at 2017 rate: £2410

Penalty: £1860

We’d be amazed if, before 2017, Infiniti didn’t drop the price of the Q50 Sport Tech 2.2d by the £171 it would require to save a buyer £1550 in VED over six-years – it would cost just £860 over six-years were its list price £39,999. As it is, a car that’s already relatively difficult to justify becomes nigh on impossible, with almost two grand extra slapped onto its six-year running costs.


Volvo V60 D6 Twin Engine SE Lux Nav (£45,175)  |  CO2: 48g/km

Six-year VED total at 2015 rate: £0

Six-year VED total at 2017 rate: £2260

Penalty: £2260

Volvo’s Twin Engine setup is a diesel-electric hybrid that offers exceptional fuel economy and high-performance pace – the V60 cracks 62mph in six seconds flat.

However, the 2017 CO2 bands put it in the ‘premium’ category, so although its first year VED payment is just £10, thereafter owners will have to swallow £450 per year.


Mercedes-Benz S300h L AMG Line (£73,375)  |  CO2: 120g/km

Six-year VED total at 2015 rate: £100

Six-year VED total at 2017 rate: £2410

Penalty: £2310

The diesel-electric Mercedes-Benz limousine is one of the most refined applications of hybrid technology anywhere – especially impressive considering the fuel is diesel.

Arguably the tax implication beyond April 2017 won’t be too big a deal for long-wheelbase S-Class buyers, but £2310 is still one hefty extra charge for a luxury car that, let’s face it, is almost miraculously CO2 efficient.


Mercedes-Benz E-Class BlueTEC Hybrid SE (£40,480)  |  CO2: 107g/km

Six-year VED total at 2015 rate: £50

Six-year VED total at 2017 rate: £2390

Penalty: £2340

The E-Class Hybrid is the perfect storm of low emissions and high list price, because its 107g/km CO2 rating puts it in the £10 tax bracket today, but the 2017 ratings system makes it a mid-level eco criminal, while its £40,000-plus price qualifies it for £450 annual in VED.



All the new rates apply only to new vehicle first registered on at after 1 April 2017.

You may also like

80 per cent of cabbies charged up over electric taxis

The switch to electrically driven or ultra-low emission