If you weren’t aware, the pricing structure for Vehicle Excise Duty (road tax) is set to change in April, meaning any vehicle registered after the first of April falls under the new rules. The move has come following a tremendous shortfall in the Treasury’s coffers owing to a large number of newly registered vehicles not paying VED under the current pricing tariff. Apparently over the last few years an estimated 25% of newly registered vehicles have fell into the <100g/km CO2 category leaving the Treasury with a vast hole of £Millions missing from their funds, the complete shake up of the system hopes to address this shortfall.
The Short story: Ignore everything you currently know about road tax and CO2 emissions, each and every vehicle with exhaust emissions (no pure electric or hydrogen vehicles) will pay an initial year payment depending upon the CO2 emissions of the vehicle and then a flat rate of £140 each year thereafter, simple right? Wrong. If you decide you wish to buy a vehicle over £40,000 then you will pay an additional £310 per year for the first year and just to confuse things further, this is applicable to vehicles with no exhaust emissions, so that nice new Tesla you were contemplating to circumvent the ruling? Yes, you’re going to pay £310 per year for five years on that.
The Long Story: As it stands now, there is a tariff of rates for both the first year and then the annual rate thereafter, the vehicles which cause more pollution, get charged more and the cleaner vehicles get charged less, or in some cases no VED whatsoever, the tariff as it stands until 31/3/2017 can be seen here:
|VED Band||CO2 Emissions||Annual Rate||First Year Rate|
|A||up to 100g/km||£0||£0|
|B||101 – 110 g/km||£20||£0|
|C||111 – 120g/km||£30||£0|
|D||121 – 130g/km||£110||£0|
|E||131 – 140g/km||£130||£130|
|F||141 – 150g/km||£145||£145|
|G||151 – 165g/km||£185||£185|
|H||166 – 175g/km||£210||£300|
|I||176 – 185g/km||£230||£355|
|J||186 – 200g/km||£270||£500|
|K||201 – 225g/km||£295||£650|
|L||226 – 255g/km||£500||£885|
For vehicles bought or registered from 01/04/2017 the VED rates tariff looks like this:
|C02 Emissions||Annual Rate||First Year Rate|
|1 – 50g/km||£140||£10|
|51 – 75g/km||£140||£25|
|76 – 90g/km||£140||£100|
|91 – 100g/km||£140||£120|
|101 – 110g/km||£140||£140|
|111 – 130g/km||£140||£160|
|131 – 150g/km||£140||£200|
|151 – 170g/km||£140||£500|
|171 – 190g/km||£140||£800|
|191 – 225g/km||£140||£1,200|
|226 – 255g/km||£140||£1,700|
Vehicles over £40,000 in value pay additional £310 annual supplement for the first five years.To summarise, there are changes across the board but the drivers effected the most will be the people who look to replace their low emissions hatchback and suddenly get hit by annual VED charges for the first time in years, some can expect an increase in VED outlay of up to 900% over the first 3 years of ownership.
Arguably the worst hit drivers will be those who look to buy or replace their expensive hybrid vehicles, for instance a Lexus NX300h Premier retails at £44,245 and emits 116g/km of CO2. So currently someone with a vehicle such as this would pay £60 on VED charges over 3 years of ownership. Under the new legislation the same car will cost you £1,370 in VED related payments over the first 3 years of ownership.
On the positive side, these changes may lead to the opportunity of some bargains in late March/early April as dealers rush to register their stock before the cut off date, so whether you look to buy or lease a new vehicle there should be opportunities out there to bag a deal.
Remember, if you lease a vehicle the VED is included in the contract so it is covered for you, but you may notice the monthly cost is higher than you would expect after April’s change (or before if the vehicle you have on order is due after the end of March).
If you wondered why George Osbourne was the cover image of the article? Gone but not forgotten, he is the man to thank for these sweeping changes to the vehicle taxation system.
Green Cars’ is the term used for zero, low and ultra-low emission vehicles (ULEVs) - with pressure being applied to lower global emission levels, the need for “eco-friendly” vehicles is on the rise. Many countries now have plans in place to abolish the use of combustion engines before the turn of the century and so more and more vehicles we see on the roads will be Electric, hybrid or very low emission petrol and diesels.
Although beneficial to the environment, ‘Green Cars’ are also beneficial from a taxation view. The lower a vehicle’s emissions banding, the lower the taxation placed against it. Many manufacturers have tapped in to this ever-growing market with their own offerings, however, Volvo were the first manufacturer to state that every one of their models will be either electric or hybrid options from 2019.