New road tax explained

You Your questions answered as new rates come into effect

WHOEVER said tax doesn’t have to be taxing never imagined how complex Britain’s Vehicle Excise Duty, or road tax, system would become.

It was only a year ago that the old Co2-based system for calculating annual road tax made way for a new, flat-rate, yearly bill of £140. And that was complicated enough, thanks to its £10 discount for hybrids, plus a £310 supplement for cars costing over £40,000.

But on 1 April this year, yet more road tax changes arrived – this time focused on diesel cars – and more confusion followed.

Consumers, unsurprisingly, are likely to have questions. Are diesel cars going to cost a lot more to tax? Are petrol cars affected at all? What about diesel hybrids? And isn’t company car tax also changing for diesels?

Here we set out in black and white exactly what the changes are and, more importantly, how much they will cost you in real terms.

What are the road tax changes? And will they affect my annual bill?

THE first thing to say is that annual road tax bills aren’t increasing; the change only affects the Co2-based firstyear rate. As a result, new diesel cars registered from this month are pushed up one band for first-year road tax.

So the first-year tax increase only affects diesels?

YES and no. While petrol cars aren’t moving up a road tax band, they, together with diesels, are subject to an inflation-based increase for the 2018/19 financial year, which also begins this month. Petrol cars with a first-year rate of £100 get an extra £5 slapped on top, while buyers of the most polluting petrol models will have to cough up a further £70. Again, this is for the first-year road tax rate only; annual bills aren’t changing.

Back to diesels – how much more will I be paying under the new rules?

IT depends on the car and its CO2 emissions, but the first-year payment for diesels will go up by anything from £15 to £560. A new diesel car that emits 90g/km of CO2 and was previously taxed at £100 for the first year now attracts a one-off payment of £125, for example. Of that £25 increase, £20 comes from diesels moving up a band and £5 from the inflationary rise.

Dealers typically bundle the firstyear of road tax into PCP deals, though, so you may not notice much of a difference in your monthly repayments if buying on finance.

Is there any way I can avoid paying road tax?

ONLY if you buy a zero-emission vehicle – essentially a pure-electric or a hydrogen fuel-cell car. These are exempt from both first-year and annual road tax bills. As soon as a car emits just 1g/km of CO2, it attracts both a first-year charge and the flat-rate annual bill: £140 for normal cars and £130 for hybrids, plus a £310 supplement running from years two to six of a car’s life if its on-theroad price is more than £40,000.

Are company car tax rates also changing for diesels?

YES, although the Benefit-in-kind (BIK) company car tax hike applies to diesel cars made on or after 1 January 1998 – in effect making all diesel company cars liable for the increase. But diesel hybrids like the Mercedes C 300 h are exempt from the BIK rise.

The BIK diesel hike also comes in this month, with the start of the 2018/19 financial year, on 6 April. It means any new diesel car registered from then will be subject to a one per cent increase in the diesel tax supplement (from three to four per cent) you’ll have to pay. That’s unless your car meets the latest Euro 6d emissions standards. While no current models can meet these (see panel, right), future diesels that do will be excused the BIK diesel supplement in total.

So if you’re currently paying 21 per cent Benefit-in-kind rates for your diesel company car, from 6 April you’ll have to cough up 22 per cent.

Back-of-a-napkin calculations mean someone on £40,000 a year driving a diesel Audi A4 and making no employee contributions or no payment for private use will pay £1,840 a year in Benefit in Kind when the additional one per cent diesel supplement comes in, instead of the £1,737 they were paying previously. PAGE 34: Britain’s best company cars

“Annual road tax bills aren’t increasing; the change only affects the Co2-based first year rate”

“Pure EVS and fuel-cells are exempt from first-year and annual road tax bills”