/ Money, Motoring

How will the changes to car tax affect you?

Car monopoly

New Vehicle Excise Duty rules come into effect a year from today. Better known as car tax, the new rules will appear to some hybrid car owners as a cringe worthy April Fools’ piece.

In fact, as it’s 1 April, here’s a list of changes to car tax rules. Can you spot the April Fools?

  • New owners of eco cars will be charged hundreds more
  • New owners of CO2 heavy cars will be charged thousands less
  • A Bugatti Veyron and Toyota Prius will be subject to the same car tax rate
  • All cars over £40,000 will be charged an extra £310 per year, for five years
  • Some electric cars will be subject to car tax

If you’re not familiar with the new rules, you might be surprised to hear that all of the above are true.

But before I get started on explaining the ins and outs of the new car tax rules, please note that the new April 2017 rules will not be backdated. Only new cars bought after April 2017 will be affected (you’ve basically got 12 months to buy a low emission car that’s exempt from car tax).

The flat rate

Currently, Vehicle Excise Duty (VED) is purely based on the amount of harmful CO2 a car emits, meaning that any low emission car (100 g/km or less) is exempt from car tax.

After April 2017, all new cars will have two rates of car tax. In the first year of ownership, the rate is based on the amount of CO2 a car emits. But from the second year of ownership, the standard year rate kicks in – that’s £140 per year, for every car, regardless of how much CO2 they emit.

That means someone who’s bought a Toyota Prius that emits 70g/km of CO2 will pay nothing under today’s rules. But if they had bought it new after April 2017, they would pay £25 in the first year. Then with the £140 payments, they would have paid £585 in road tax by year five and £1,285 by year ten. That’s an awful lot more tax than the zero amount of tax you’d pay on any pre-April 2017 Prius.

But swap that Prius for a Subaru WRX STI, which produces 242g/km of CO2, and things get hazy. Under current rules, you’d end up paying £2,830 by year five and £5,280 after year ten.

If that Subaru had been bought after April 2017, you’d pay a whopping £1,700 in the first year but, thanks to the flat £140 rate, you’d only pay £2,260 over five years and £2,960 over ten. That saves them more than £2,000 by the tenth year.

So yes, future low emission car owners will be paying more than they were, and gas guzzling cars will be paying less than they were.

The £40,000 rule

After the first year rate, all cars that cost £40,000 from new will be subject to an additional £310 charge for five years.

Even some electric cars will be charged. Although electric cars will qualify as zero-emission vehicles and will continue to be exempt under the new rules, you’ll have to pay if the car costs over £40,000.

Electric cars costing over £40,000 will still be subject to the additional payment of £310 for five years. That’ll be a total of £1,550, despite zero CO2 emissions. Sorry, future Tesla owners.

Bugatti vs Prius

This is as close as we get to an April Fools. The first year rate is staggeringly different (£25 for Prius vs £2,000 for the Bugatti) and, unless somebody sells you a brand new Veyron for £39,999 or less, the Veyron will be subject to the extra £310 payment from years two to six.

However, when both cars reach seven years old, they will be charged the same £140 per year for the rest of their lives. So, they will at least end up on the same rate.

April Fools?

So no, this is no April Fools. This is all genuine and the new car tax rules are coming in next year.

Do you agree with these new tax rules? Will it make you buy a low emission car before 31 March, or will you be waiting for the change to happen to buy a CO2-chugging 4×4? (Or a Bugatti Veyron?)

Comments
Member

To me it shows just how little our Gov cares about us or the environment. . . I dont believe they ever did care

I got involved with autogas a number of years ago at a suggestion of Gov. . The whole 9 yards…Approval the works
What a disaster. . .Cost me a bomb. . I had no sooner jumped on the bandwagon than the Gov bathed it’s self in heavy oil (diesel)

I can safely say I have done my bit albeit I am not perfect but I have to have one of the lowest footprints of anyone living in the near sane/near normal world/lifestyle and I am still doing so and will I hope for many years to come

I know Gov’s has had a bit of a setback with the VW scandal showing up the true colours of heavy oil but what an about turn
VW can throw their EGRs etc in the bin because long term they mean nothing. . .No longer required. . Lets all go CO2 in a big way and boil the bloody planet and lets be quick about it
Maybe I should sell the place. . .
Get ourselves a big V8 diesel American RV. . .and not worry about anyone or anything because that’s the example I see here
Why worry about the cost of funerals or care homes, , blow the lot

I havnt read any more than the intro above but if that’s the way it is they’ll not have my backing next time around and over here that’s in a few weeks. . .

We have to change as a race, , ,as in human race not continue as was let alone back pedal which this is. .

Just my thoughts

Member
Bromley61a says:
2 April 2016

Sorry, it’s not really the Government, rather the liars and con artists at The Treasury – unelected, undemocratic and always (almost) getting their own way because THEY ARE PAID to do the sums with no-one to check on them – witness Equitable Life, Northern Rock and other rip-off fiascos.

Member

. . . err, I don’t think you can blame the Treasury for the ruinous behaviour of the directors and management of those two institutions, Bromley61a. Their actuaries and auditors had a hand in it too I suspect.

Member

I don’t agree with free car tax. All cars use roads, roads have to be maintained, so all drivers should pay towards the upkeep, assuming that is why we pay car tax.

But there is no reason why there isn’t a basic rate car tax then a gradient tax on the amount of CO2 cars emit that could apply to all types of vehicles that use the roads. It would be much simpler than the intro and would encourage sales of lower emmission vehicles.

Member
Bobbie Dickie says:
3 April 2016

This is the most relevant and appropriate approach. Too obvious for elected members and their actors.

Member
elato says:
15 May 2016

……….and why should’t cyclists pay road tax? They use the roads and cause no end of delays etc!!!

Member

It has been the subject of debate. They would all have to be registered and given some ID on their bike; and how do you deal with children? It is after all a healthy pollution free occupation. We should promote it, shouldn’t we.

I do agree about delays when a herd of them ride side by side without leaving gaps for impatient motorists to seek refuge in when overtaking. But those delays don’t last that long, and anyway there’s probably a traffic jam, or a tractor, round the next bend.

Pedestrians also cause delays – crossing roads – and accidents – crossing roads. Perhaps they should pay a pavement tax (that might also help clear up discarded chewing gum and other litter).

Member
Bassmanandyt says:
24 May 2016

elato

I can’t speak for other cyclists, but when I’m commuting the 5 miles to work on my push bike, the car and motorcycle that I do pay road tax for remain at home causing no additional damage to the roads or environment. Would you care to argue on my behalf for a discount for me for all the days I cycle instead of using my car or motorcycle?

Thought not…!

Member

Bassmanandyt, well no one else gets a discount when they choose to walk, use the bus, the train or simply not go out in their car! 🙂 Just think of the fuel duty and vat you don’t have to pay on those days!

Member

Zero or low car tax for low emission vehicles is a sign that the government cares about the quality of the environment and the health of those living in urban conurbations. This move shows the opposite. I take Alpha’s point about road tax, but the amounts spent on roads in the UK AIUI fall well short of the total revenue generated by road tax. I’m fairly sure the motoring organisations have been campaigning for years to get more of the road tax revenue spent on the roads and this move simply ensures that our children will live in an increasingly polluted atmosphere – at least in cities – until another government or chancellor starts to comprehend the danger of CO2 emitting vehicles.

Member

Raising VED for hybrid cars will compensate for the fact that their drivers contribute less through fuel duty. Electric-only cars still pay no VED, so make no contribution. Having said that, we need to move towards use of electric vehicles in cities, some of which have very poor air quality.

The link ‘Vehicle Excise Duty’ is to a Which? article on car tax bands from April 2015.
“The current VED bands will stay in place until 31st March 2017, whereupon major changes take affect.”
“These changes will not effect cars bought on the 31 March 2017 ….” 🙁

Member

My point about affect and effect is that the wrong word is used in both cases.

Member

For private cars, £140/year or 38p/day is a small amount of tax relative to the amount collected via fuel duty and VAT on fuel.

CO2 emissions are approximately proportional to the amount of fuel used, so those producing the most CO2/mile will be paying most tax/mile anyway.

Now that both MoT and VED records are all computerised, it is hard to see what useful purpose, if any, is actually served by the VED system.

If our current masters (sorry elected representatives) really do believe in “small government”, they could easily arrange to keep MoTs but scrap VED for all private cars.

There might still be a case for retaining VED for the likes of HGVs though – if these cause substantially more wear and tear to the roads.

Member

I dont agree with zero road tax for any vehicle. . However I also didnt agree with seemingly silly amounts small and large based on co emissions

CO emissions were not the whole story but another selling point for GOV just like this lot have the deficit on their minds and little else no matter who suffers and when they have messed everything up the next lot will arrive with equal zeal and be as determined to be at opposing poles as can be so really neither lot are worth their salt. . .No logic or loong term benefits. . . Just the thought of power
Best job would be to put them all in a big net and drop them off near the north Atlantic ridge

Cars with zero or £30 tax was bonkers. . . Many of these are now heavy smokers and anyone with a brain would have known this would happen but not those who read reports and data it seems

The emphasis should have been on the cleanest vehicles as in those that used cleaner fuels and that would require less after burn cleaning. . . The CAT has proved very reliable on petrol and lpg and on lpg has nearly nothing to do. . . .

Vehicles use roads and roads need money but there is only a % of road tax put back into the roads and as best I remember it may be below 50% so we are over charged on that front anyhow. . .Maybe some of you have that info to hand or remember better than I do.

Member

The government seems to be making a simple concept far more complicated than necessary. The initial cost of a car should have no bearing on vehicle excise duty since that is reflected in VAT on purchase . There should certainly be both an incentive to run low-emission vehicles and a deterrent to using high-emission vehicles with a balance [the standard annual charge] applying in the middle range. Road fuel duty can be adjusted to reflect road mileage, vehicle performance and consumption efficiency but the government has allowed this to become a no-go area. We need a return to rational taxes and duties.

I am not sure how this will affect council parking permit charges for people in residential parking control zones. Many give discounts for electric and low-emission vehicles and charge much more for high-emission vehicles and the charges are linked to the VED rates. With these being thrown up into the air I suppose some new bureaucratic wheeze will be introduced piecemeal across the country. You would think on-street parking charges would be linked to the length of the vehicle in the first place with an adjustment for emissions based on standardised figures.

It should be borne in mind that owners of electric vehicles are paying high taxes and levies through their electricity bills even if they charge them on an overnight tariff. Running an electric car might justify investment in solar panels for those whose properties are suitable and maximising the export of electricity during the daytime to cross-subsidise the consumption of power overnight for recharging. Perhaps Which? would like to commission some calculations.

Member

You have a few good points John
Electric cars do not run for free. . . There is not much tax on electric unlike road fuels but you have your costing idea right in that electric per kwh is not cheap when compared to kwh from fossil/diesel/petrol/gas unless of course you can use the free charge points and they will not last.

Do Gov’s ever do anything simple John
They like to make a fuss about everything, ,Thats their idea to seem to be solving a problem that often doesnt really exist

I have a borehole (we once used a spring well) and everyone thinks it’s great to have “free water” but I had to pay for the bore and equipment and the power needed to pump the water plus a filter every six months. . . .It is not free. . . . Electric cars are not free, ,actually pretty expensive and the power is not free.. . .
Give me a little Fiat on lpg any day and I’ll be happier with that

Member

Taking the 5% VAT and the government impositions on electricity bills together I think electricity for vehicle charging is quite highly taxed, the additional iniquity being that the VAT is applied on top of the other government levies.

It has sometimes occurred to me that with a combination of flywheel technology, batteries, and wind turbines on the roof cars could travel on free power in hilly terrain. I have no understanding of the mechanics and dynamics involved so it will probably remain a pipedream. A major drawback is that the Treasury would have to look elsewhere to offset the tax revenue loss.

Member

I know we need money to run our country but I question what Gov actually does with the vast amount of tax and levies they collect

Yes there is 5% vat on electric and some impositions but nowhere near what we are led to believe of late when our Gov decided to abandon renewable’s more on international political grounds than logic
Search the BBC news site for renewable’s and you see it’s just coming good so why walk away from a good source. . . .Keep at it to we have enough to have to switch some off when not needed. . . There is no over capacity, ,there are switches

Petrol and diesel has 59.95ppl of duty after oil company price but before retailer price which then has 20% vat on top. . . .There would be some duty to add to electric before it would come near this lot as a revenue stream
I’m not anti electric. . .Electric has the best potential but is some time away in the levels needed for additional fleets of vehicles
Malcolm is correct that city traffic needs to seriously reduce but I’m a realist and I dont know how to get people to sit still. . . People love the feel of power and movement and they’ll not part with it easily
Many cars on the road have in excess off 100hp and many in excess of 200hp .. . .What real need is there for this

We need to change but we dont like change and our Gov and business minds can only think of expansion which has not been sustainable for years
I dont think in all honesty we will change before we are on our knee’s begging for food and water and that will be too late for many if not most
All the top brass will be somewhere with the best chance of survival but I dont think they’ll have the wit to survive because they dont have the know how. . . .It’s not easy growing food from a book

Now I’m probably out on a limb with that but I’m not left of centre so dont hit me like a load of lead. . I’m stating what I see and I’ve been interested in this for most of my life and have worked with energy production near all my life plus I was brought up on a farm and know a few things there also
There is no simple fix

Member

VED is not the only tax motorists pay, and by far and away the least significant. VAT on a new car will penalise the Bugatti owner by around £200,000 (or more realistically a BMW 5 around £8000) whereas a small car might be nearer £2000.

Fuel consumption (and thus pollution) will cost the big car owner far more in vat and fuel duty – possibly 5 times as much as a small car.

However pollution depends upon how much fuel is burnt, so upon how many miles you drive. It therefore seems much fairer (to me) to have an ongoing tax that reflects this, and taxing the fuel you buy achieves this. VED is not pollution-dependent in practice – your Bentley might sit in the garage for most of its time and just pollute when you go to the races.

As for electric cars, they do pollute through emissions from power stations. but, more importantly, as they become more popular they will place an increasing load on our already-overstretched generators. So if we are not careful there will be power cuts for the vulnerable while the environmentally-friendly car owners recharge their vehicles for their next commute.

You need to look at this problem in the round. And, if you want to reduce pollution in town and city centres, the most effective way is to reduce the number of vehicles using them, and the time spent blowing out poisonous fumes in traffic jams, by introducing real restrictions for non-essential traffic.
:mrgreen:

Member

Absolutely right Malcolm. To improve our quality of life we have to make our towns and cities seriously unattractive to car users and strictly control commercial movements unless less-polluting traction is available at an economical price.

Electric powered tugs [as once used at railway termini] could haul a road train of several vans and light goods vehicles, or demountable containers, from the outskirts into drop-off points where stores’ own electric carts and floats [as once used by the Post Office and dairies] could collect their inwards goods. For a better future we might also have to look to the past.

Member
dermot0 says:
2 April 2016

If car tax is really about providing a good quality road system rather than raising money for the government’s coffers, then owners should be taxed according to use. The reasonable way to do this is to do away with road tax altogether and put the tax on fuel – that way those who burn more fuel will pay more tax and those who use the roads the most will also pay more. In addition there should be no effect on car sales and production so an important industry will be safeguarded. Is this too simple and logical for politicians to understand ?

Member

Not only that, Dermot0, it would create an incentive to develop much more efficient engines as well as making people pay fairly to use the air conditioning which chucks more hot air back into the atmosphere.

Member

John, , you and are on the same page on this. .
Use cleaner fuel and the tech we have to do as good as we can now not b****r about with tax rates. . .unless your going to reduce tax on real time cleaner combo’s

Air con only shifts existing heat from the inside to the outside but wastes lots of fuel to drive the pump

Member

Yes, DK, I realise that, but most drivers I know use the aircon when it really isn’t necessary and set far too low an interior temperature. Even when it’s 30 degrees outside you only need to take it down a few degrees to feel comfortable inside – and cars still have windows and ventilators! It’s hard to take people’s hard-up stories seriously when you know they’re driving around with the aircon on in mild but not warm weather.

Member

Many drivers have the air conditioning on throughout the year, whatever the weather. I would not want to drive a car without aircon, but mine is used selectively.

Member

Being selective in the use of all energy is the key to economy and ultimately protecting our natural resources. I agree on not wishing to drive a car without air conditioning: there are safety advantages in reducing the interior temperature on very hot or humid days as a comfortable climate in the car can prevent driver fatigue, discomfort and concentration lapses. It can also contribute to passenger calming.

Member

As a matter of interest, are electric cars powerful enough to support air conditioning while achieving satisfactory speeds? I have no direct knowledge, but I suspect it would severely limit the available range from an overnight charge.

Member

That’s a good point, John. Air conditioning just pushes up fuel consumption in a conventional car but where the power has to come from batteries it is a much more important consideration. Perhaps we can have some input from those living in warmer countries than the UK.

Member
Jack says:
25 March 2017

Couldn’t agree more, I’ve been saying the same thing for years!

Member
Robert says:
2 April 2016

This all goes to show that politicians can not run a business as they do not understand the principals of business, and to try to solve a problem do they use a simple solution NO they just make it even more complicated and expensive.

This is the problem with career politicians they do not have the brains they were born with and how the hell they managed to get through university I don’t know.

Put the duty on the cost of fuel so if you use it you pay for it, as for electric cars fit a meter which registers how much electric it uses from the national grid and charge appropriately.

Simples

Member
Brian Pull says:
2 April 2016

So called ‘Road Tax’ has has nothing to do with roads, little to do with the environment and is merely a revenue source. Leaving aside the inefficiencies of governments and the political elite of both hues (none of whom seem to be from planet earth), tax clearly has to be raised, but this seem a particularly bad way to do it.

The simplest method of raising revenue from road use (assuming there is justification in so doing) is surely via fuel. The more you use, the more you pay. This is not only fair and proportional, but also encourages energy efficiency. And the simplicity of not having a Road Tax system to administer (or worry about as a User) is a further bonus. But hey, why simplify something when you could spend time complicating it?

And whilst I am (extremely!) unlikely to buy a car in excess of £40k, why is there a Road Fund tax element to such a purchase? Fortunate people able to buy these vehicles are already paying extra in VAT, so why the arbitary ‘supplement’? Any also why for five years?

As with many tax proposals, it is unfair, over-complicated and unneccessary. But that’s politics for you!