Green machine or gas guzzler. . . it’s a taxing decision
Thinking of buying a hybrid or tiny-engined city car? Move fast. You have 20 months before the incentives run out, says
WHEN George Osborne delivered the first Tory budget for 19 years last month, many may have skimmed over the part about vehicle excise duty (VED). But if you’re buying a car soon, you should have paid attention. Because in April 2017, everything about the way our cars are taxed will change.
Currently, cars are taxed according to how environmentally friendly they are. The more CO2 they emit, the higher the annual duty, in 13 bands ranging from zero to £505.
But since these rules were brought in in 2001, engines have become smaller and more efficient. The tax exemption for cars emitting less than 100g of CO2 per kilometre once applied to only a handful of hybrids, but now it’s well within the reach of most small cars.
Under the new rules, cars will be divided into just three bands: Zero emissions, standard and premium. Plug-in electric cars that emit no CO2 will pay no tax. Cars which emit some CO2 will cost £140 per year – including the low-emitting models that have proved so popular and currently pay no VED. And cars that cost over £40,000 will be classed as premium and taxed at £450 per year for the first six years, no matter how much CO2 they emit, if it’s more than zero. The change only applies to cars registered after April 2017.
For example, the clean but costly Mercedes C Class Estate 350e, a £41,000 plug-in hybrid, will cost you nothing in tax if you buy it before April 2017. Buy it after that and the tax will be £450 a year for five years after £25 in the first year. By contrast, a dirty but cheap Ford Mustang 5.0 V8, which emits a choking 299g/km of CO2, will be taxed at £1,100 in the first year, then £505 every year if you buy it now. Wait until 2017, and you’ll still be punished in the first year at £2,000, but thereafter it will cost £140 a year.