New car tax charges will come into force from April 1, 2017, as the DVLA brings in reforms that could hit your pocket. From that date, you could be paying much more to tax your car – unless you drive an electric one. The changes are being made to reflect changes in emissions technology in newer cars. In fact, some of the most popular cars, once considered the height of “eco-friendly” will now cost their owners an extra £900 over five years!!
Here’s what we know about the changes and how they could affect you:
Will I be affected?
Under the new rules, only electric and hydrogen cars will be exempt – while all other cars will pay a flat rate of £140. This means a car emitting 99g/km bought before April 1 will be free of road tax for life – but those bought after the date will cost £120 in the first year and £140 a year thereafter.
Cars emitting 131g/km will be taxed £200 instead of £130, those emitting 151g/km will be charged £500 instead of £180, those emitting 171g/km will be charged £800 instead of £295, and those emitting 191g/km will be charged £1,200 instead of £490.
The highest possible charge will continue to apply to those emitting over 255g/km, but that will rise from £1,100 to £2,000.
However, those buying high-polluting cars may even break-even, with tax set higher in the first year and subsequently falling every year after that.
Why are these changes being made?
The current structure based on CO2 bands was introduced in 2001 when average UK new car emissions were 178 gCO2/km. The Band A threshold of 100 gCO2/km, below which cars pay no VED, was introduced in 2003 when average new car emissions were 173 gCO2/km. Since then, to meet EU emissions targets, average new car emissions have fallen to 125 gCO2/km. This means that an increasingly large number of ordinary cars now fall into the zero-or-lower-rated VED bands, meaning they pay no tax at all.
What if I can afford a luxury car?
It will be even worse for those who want to buy luxury or low emissions cars. Currently, they are tax free but the cost will rocket to £310 a year from the second year of operation. Cars worth more than £40,000 which produce emissions will have to pay £450 a year in years two to six.
So what do I do now?
If you are unable to buy your low-emissions car before April, then it is worth considering a nearly-new car, which will continue to be taxed under the old system.
Could I actually be better off?
Possibly! The rules are being introduced as greener cars, which until now have benefited from lower car tax, increase in numbers on the road.
That means the Government has been losing out on tax revenue. That will be reversed as the UK’s best-selling car, the Ford Fiesta 1.0 EcoBoost will now cost owners £540 more to tax over four years.
But zero-emission cars won’t be completely exempt from the changes on April 1. After one free year, owners of expensive-to-buy electric cars – that’s anything that costs over £40,000 – will have to pay £310 a year.
How does the new system work?
The new system means there are three bands. Zero-emission cars pay no tax. Standard cars (anything over zero) pay £140 a year and owners of any car that costs more than £40,000 – regardless of its emissions – will pay £310 for five years. On top of that, in the first year, cars are rated on their carbon-dioxide emissions and will pay a one-off VED of between nothing and £2,000.
So owners of hybrid cars, who currently pay no car tax, will pay £10 in year one, then £140 a year after that. Owners of some high-performance cars, or cars which drink the fuel, will be better off – as the yearly flat rate of £140 is less than they currently pay.
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