Nobody really likes to pay Vehicle Excise Duty or ‘road tax’ as it is more commonly known, although we all like to think that it makes an important contribution to the quality and drivability of the roads, nationally. The way road tax is charged was changed by the previous Chancellor of the Exchequer, George Osborne and it becomes considerably more complex from April 2017, in other words, right now. From now on it is worth being road tax savvy.
One thing to bear in mind is that the current rules continue to apply for vehicles registered up to the end of March 2017. If you are driving a car registered up to this date you do not need to worry too much, there may be changes in subsequent Budgets to the tax you will pay, but these are likely to follow historical trends and change gradually over time. Things become more complex when you start dreaming about owning and driving a new car. It really pays to have the following facts in mind as you wander about the car showroom.
The first year’s payment of road tax on a new car, the ‘first year rate’, is usually wrapped up in the whole cost package of the new car. We tend not to be so aware of the cost as a result but from now on this is not longer the case. This is because the kind of car you choose and the CO2 emissions given out by the car will impact significantly upon the amount of road tax charged. It will now really pay to question your dealer about the facts behind your new car.
It is in a year from now, From April 2018, that the tax starts to feel more complex. The second time the car is taxed you will find yourself paying one of three rates:-
- £140 for most petrol or diesel vehicles
- £130 for alternative fuel vehicles
- £0 for car with 0 CO2 emissions, ie electric cars
If your new car had a higher list price when it was first registered, ie more than £40,000, you will be paying an additional £310 on top of the relevant standard rate. So, depending on the type of car, you could find yourself paying :-
- £450 for most diesel or petrol cars.
- £440 for alternative fuel cars.
- £310 for a car with zero CO2 emission.
This amount is payable each year from the second year that the vehicle is taxed, up to the sixth year. After the sixth year the additional £310 is no longer payable and the road tax reverts to the amount payable in the first year.
This means that when you are thinking about buying a car that carries a first registered price of more than £40,000 you are actually going to pay an additional £2,250 in the early life (first six years) of the car.
This is worth bearing in mind, both now and in the future when these rules will also impact upon vehicles offered for resale.