Increases to road tax will begin from April 1
New bands will again depend on C02 emissions
The new VED (Vehicle Excise Duty) rules are almost upon us – and it could have major implications if you are planning on buying a new car.
The revised road tax measures will provide a big shake-up of the current road tax system, with the revision of the vehicle tax bands affecting every person who buys a new car from April 1.
And naturally the biggest concern among new buyers in light of the VED tax alterations is this: will you be better off buying new car before the tax updates comes into force, or should you wait until after?
There’s no straight answer, as it depends on the type of new car you’re planning to buy and, crucially, what its CO2 emissions are.
Currently road tax is based on the CO2 emissions of the vehicle – that means the higher the CO2 emissions of the vehicle the more road tax is due.
There is one rate for the first year (First Licence Rate) and another for the second and subsequent years (Standard Rate).
The Standard Rate, like the First Licence Rate, also increases with CO2 emissions. From April, the first-year rate will continue to be related to the CO2 emissions of the vehicle. However the bands will change and rates due will increase. For vehicles with a List Price of £40,000 or less, the rate will be £140. For vehicles with a List Price over £40,000, an additional rate of £310 (a total of £450) will be due for five years from the end of the first year. Ater the additional VED rate expires, the £450 will revert to £140, or whatever the prevailing rate is at the time. Alex Sharp, general manager of Macklin Ford, said: “If you’re planning on buying a brand-new car, now might be the right time. As of April 1, changes to VED (Vehicle Excise Duty), otherwise known Advertising Feature as road tax, will affect the running costs of brand-new cars.
“An example would be a three-door or five-door Fiesta 1.0 Eco Boost Manual Petrol model.
“Before April 1 this would have no cost to tax. After April 1, this would cost £400 for three years.”
The changes to the tax system were set in motion by former Chancellor of the Exchequer George Osborne who was head of the Treasury when David Cameron was Prime Minister.
Under the outgoing VED system, most new car buyers were paying very little (if anything at all) in the way of road tax, which has been costing the government millions of pounds annually.
The new regulations will mean that all new cars will face a significant increase in their tax demands during their first year of registration, and from the second year onwards a flat rate of £140p/a will apply.
If you own an alternatively fuelled car (for examply a hybrid or a car that runs on LPG or bioethanol), you’ll pay £10 less for your first year of tax and then £130p/a.