Vehicle Excise Duty (VED), commonly known as Car Tax or Road Tax, is changing. Unless you own a purely electric car, these changes represent a significant hike in costs for all makes and models of vehicles.
If you’re wondering how this will affect you as a car or van owner and how can you avoid the rise in prices, read on. The Bayfield Vehicle Hire team in Shrewsbury is here to help.
The new scheme
All new vehicles registered from 1st April 2017 onwards will be assessed under the new VED scheme. Most vehicles will incur a first-year charge based on CO2 emissions, followed by a flat charge of £140pa from the second year onwards.
This means cars with higher emissions will pay more in the first year and then drop to £140pa afterwards in line with almost all other vehicles.
Vehicles over £40,000
Higher-end vehicles costing £40,000 or more will follow a different plan. They will pay even more and some vehicles will be penalised heavily, meaning higher costs for the owners. Vehicles costing over £40,000 will also pay a first-year charge based on their CO2 emissions, followed by £140pa, but additionally will be charged a supplement in the first five years of £310pa.
Will my current Car Tax change?
The changes only affect new cars registered after 1st April 2017. Those registered before this date will continue under the current system.
What to expect
Currently it is estimated that 25% of new vehicles don’t pay any car tax at all. This will change, as in future the only vehicles that enjoy zero car tax will be those with no exhaust emissions whatsoever. This means the only vehicles that avoid Car Tax altogether will be pure electric or 100% hydrogen vehicles.
For example, owners of a Ford C-Max 1.5TDCi (120) Zetec currently pay £0 in the first year then £20pa, a total charge in the first three years of £40. After April, they will pay £140pa, a total three-year charge of £420. That’s a whopping 950% increase.
This compares to the Honda CR-V 2.0 i-VTEC SE 4WD that currently pays £720 in the first three years but after April will attract £1,080. A 50% increase of £360.
Why are these changes happening?
The government has experienced a significant drop in revenue from VED and is taking big steps to rectify the problem. With a quarter of new vehicles currently paying no VED at all, tax revenue from motorists has fallen, and manufacturers have made great progress in reducing emissions through improved technology to take advantage of lower VED rates. The government has decided it’s time to reset the system.
How to avoid the price rise
Increases of this level will have a significant impact and could lead buyers to change their behaviour. Coupled with Brexit and recent exchange rate fluctuations, this is a worrying time for the motor industry in the UK.
However, there are measures new car buyers can take to avoid the price rise.
The first is to defer changing their car, if possible, to retain the current charging structure. The motor industry will be aware of this, and won’t want buyers sticking with their current model. Expect them to react with enticing offers, encouraging us to continue our obsession with new cars.
Another option is to bring forward your proposed change. Remember, you can buy a new vehicle after 1st March on the new ’17 plate under the current VED system. The result is a new car sat on your driveway with the latest plate but which retains the old VED levy. We expect dealers will also be preregistering vehicles in this period so even if you buy after April 1st you may find a suitable vehicle that has already been registered and taxed under the old system.
One thing is sure though: whichever way you run your vehicle, whether you buy, rent or lease, I’m afraid your motoring costs are set to increase….