Car Tax Changes – The Need To Know

Are you confused? Don’t worry we’ve got you covered.

Out of the many running costs that you need to keep in mind when buying a car, it’s road tax you need to regularly keep updated with.
Throughout the years, the Government have made slight tweaks and changes to the UK vehicle tax, otherwise known as VED (Vehicle Excise Duty). The purpose of this is to reflect the buying habits of the UK population.
The most recent changes were made last April, these were designed to boost tax income for the Government. As car makers reduced vehicle emissions, the Treasury wasn't receiving as much revenue from VED in comparison to previous years. Therefore, they felt the need to update the road tax structure, with the result being new car buyers paying more into HM Treasury each year.
Costs from April 2017-18
  • If you are buying a new car, you will have to pay road tax based on the current system from 1st April 2017.
  • The 1st year of road tax is based on emissions, whilst there is an existent flat rate of road tax. This flat rate is calculated by looking at the new car’s on-the-road price – but don’t worry, as a buyer this isn’t your concern, it is more the manufacturer’s.
  • When it comes to the second-year rate, you’ll have to pay after 12 months of owning the car.
  • Of course, this can vary depending on what type of car you have i.e. if it’s electric, powered by a combustion engine (petrol or diesel) or uses an alternative fuel source (plug-in-hybrid). It also takes into consideration, if the car costs more than £40,000 new, a supplement is added for the first five years of tax regardless of the engine type.
The second-year standard rates are:
  • £140 a year = Petrol or diesel vehicles
  • £130 a year = Alternative fuel vehicles (hybrids, bioethanol and LPG)
  • £0 a year = Vehicles with zero CO2 emissions
Costs from April 2018 onwards
There will be a new revision added to road tax rates; this has come about because the 2017 Autumn Budget revealed the Treasury will introduce a new tier of taxation for new diesel cars that don’t meet the latest Euro 6 emissions legislation. 
From this additional tier, HM Treasury claims this will affect nearly 2 million new cars.
What’s the new test?
This is the second part of the EU type approval process, the real driving emissions (RDE) test. In this test, a vehicle must emit no more than 1.5 times the current nitrogen oxide limit of 80mg/km during real-world driving. All car makers must display these emissions figures produced by all the cars they sell, so this information will be available to you before you buy a new car.
The changes are designed to penalise cars that pollute more, but it's worth remembering that the extra tax will be included as part of the on-the-road cost of buying a new car. Once you're past the first 12 months, then these models will face the same annual fee as cleaner models. That means these 'dirty' diesels will cost either £140 or £450 in road tax, the latter price for cars costing more than £40,000.

Older car tax
It may seem that these changes are a bit terrifying, however, this will not affect a car that has already been registered and is liable for annual road tax.
Also, none of these is backdated so they only apply to new cars – your current car will cost the same in road tax for the rest of its serviceable life, including if you decide to put it back on the road after a SORN declaration.   

To conclude, we suggest the following:

·      Buy before April
- If you really want a diesel motor and are concerned about the tax fees afterwards, remember, there is still a few weeks left to purchase a new diesel car.
- Any car taxed before April 1st will pay under the existing 2017 standards of VED
- New cars can be registered up until the final day of March.

·      Don’t buy over 110g/km
- If you do miss the April 1st deadline, it is worth considering buying a smaller and less polluting car.
- Cars producing between 171 g/km CO2 and 225 g/km CO2 will have to result with paying up to £500 more for their first-year car tax.
- Cars that produce emissions up to 110 g/km of CO2 will only have to pay a £20 price increase. These are typically superminis, small cars or hybrids – so this may not be suitable for everyone.

·      Forget about diesel
- Driving a diesel car isn’t always the best option for you, especially with the increased tax.
- However, if you are a regular motorway-driver, a diesel is more suitable for your needs.

·      Pre-registered cars
- To avoid the tax increase, a pre-registered car is a good idea. It will be attached to an old tax rate and you are the classified second owner – therefore, it will be significantly cheaper to buy.

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