September 13, 2018 at 10:59 AM
New car tax rules affecting millions of UK drivers will soon be taking effect having been announced in the Autumn Budget 2017. Here’s your guide from Motor City Plymouth on the latest updates to the vehicle excise duty (VED) system:
Didn’t the VED rules change in 2017?
Yes they did. Whilst the amount paid for car tax was previously based exclusively on a CO2-based system, an overhaul to the system for April 2017 meant that only the first year VED rate would be based on the vehicle’s CO2 emissions. For subsequent years, VED would be chargeable as a flat £140 for all new cars except those with zero CO2 emissions – which were exempt. However, any car with a list price of more than £40,000 would be liable to an extra £310 charge in the first five ‘standard rate years’ (Years 2-6).
List price refers to the price of the car before the ‘on-the-road’ charges are added, such as a delivery charge, new vehicle registration fee, number plates and fuel. Therefore, unfortunately, any discounts negotiated on a new car would not allow you to avoid the £310 ‘Premium’ charge.
However, any accessories you add to your new car could end up costing you more than £1500 over five years in extra VED charges. For example, the list price of the latest Audi Q5 Sport 2.0 TFSI quattro has a list price of £39,740 which would mean you would not be liable for the extra £310 annual charge. However, opting for any extras such as metallic paint at £645 would push you over the threshold, meaning that extra paint would actually cost you an additional £1530 over 5 years.
The introduction of the ‘premium’ surcharge also meant expensive £40k+ zero-emissions cars no longer receive a free ride from the government, as they too must fork out the £310 supplement annually. Meanwhile, all other cars over £40,000 will pay £450 a year (£310 supplement + £140 flat rate) between years two to six - then they will revert back to the £140 flat rate after year six.
Major changes to car tax in April 2018
It’s important to note that these changes, which take affect from 1st April 2018, only apply to cars - not vans or commercial vehicles, specifically diesel cars at that.
From 1 April 2018 the first-year VED tax rate for new diesel cars will go up by one band, adding between £20-£500 to year one rates depending on how polluting the car is. These latest changes only apply to diesel engines that do not meet the latest Euro 6 emissions standard. However, at present, no diesel engines comply with the latest standards.
The new tests – called the RDE test – measures a car’s emissions in real-world testing rather than a laboratory.
The CO2 based first year VED rates for diesel cars registered after 1st April 2018 will automatically be one band higher than those registered after April 2017, when the latest charging categories came into effect.
Less vehicles will be VED exempt
Whilst the old VED system seemingly encouraged motorists to choose low-emission diesel vehicles, rewarding them with nil-rate or minimal annual VED rates (up to £30), the current system only offers nil VED rates to vehicles with no tailpipe emissions – so purely electric and hydrogen-powered cars.
Will the new VED rules affect me?
The good news is that if you’ve recently purchased a used car, it’s unlikely the government’s latest changes to car tax rates will affect you. The changes only apply to vehicles registered after 1st April 2018.
If your car was registered between 1st April 2017 and 1st April 2018, then the cost of your road tax will change when the Year 2 rate (a flat fee of £140) is payable in the coming months. VED rates will increase to £140 annually for 2018/2019 if your vehicle’s emissions are between 1 and 100m/km CO2. Alternatively, if your car emits more than 111g/km of CO2 gas, then your Year 2 rate will reduce to £140 annually. The second-year VED for cars falling into the band of 101-110g/km for CO2 emissions will remain at £140 a year – the same as the first year rate paid. Should your car be classified as zero emission, then your vehicle will continue to be exempt from road tax.
Don’t forget – if the list price of your car was more than £40,000, there’s an extra £310 added to the price of your 2018/19 road tax, even if your car is classified as zero-emissions.
Cars registered before April 2017 will continue to pay the old CO2-dependant VED rates even if they change owners. Fortunately for used car owners, the previous system was much more favourable to lower-polluting vehicles.